1. Do you see a growing interest in Vietnam by foreign companies and investors? If so, why?
Yes. The country’s deeper and wider integration into the world’s economy is offering new opportunities for M&A activities. Encouraging signs for foreign investment are the recovery of the macro-economy (Vietnam economy grows at highest rate in five years), reformed policies to open a wider door to foreign investors, the conclusion of FTAs and TPP, the bouncing back of the stock market, and new regulations including wider room for foreign investors ownership in public listed companies.
The introduction of the new Investment Law, Enterprise Law and other commercial laws and economic policies are creating a better legal environment for investment and trade in general and M&A market.
Major M&A trends in Vietnam are forecasted for 2016, including bank restructuring, acquisition and mergers, growing Japanese investment in Vietnam via M&A and reform of state-owned enterprises. The derivatives market being expected to open next year will help prevent risks and boost the growth of the stock market, promoting M&A deals.
2. Do you think this trend will be sustainable next year?
The trend will continue next year. If foreign investors come to Vietnam to participate in production and business, they could approach large markets that are member countries of the TPP and EVFTA. In the past few years, there have been many large projects of the US, Japan and EU to take advantage of the upcoming trade pacts because timing is of the essence and first comers benefit the most.
Many other international groups have also expressed their intention to relocate the business and production to Vietnam. The real impacts of many recent sealed trade deals need to be assessed over a longer period, but the trend will continue until and after their effective date.
3. What does this mean for the economy and what do you think the government should do to attract more foreign investment?
Vietnam must walk its talk with regard to its Asean Economic Community Commitments (AEC) and WTO Commitments and TPP and EU Vietnam FTA Commitments to be credible for foreign investors.
Only then Vietnam will attract a greater and sustainable flow of foreign direct investment capital.
Institutional reforms, especially in public investment procedures and Dispute Resolution as well as Enforcement of Arbitration Awards are a “MUST” to facilitate foreign investment, leading to a more efficient legal framework, higher productivity, better investment environment as well as improvement in business capacity, living standards and higher level of development.
However, in the meantime, the Government should:
– Take action to solve the Non-Performing loan problem by moving away from over supporting the State Owned Enterprise sector with loans.
– Active support for the private sector with establishing a performance based access system for loans.
– Improve the Education System
– Improve labor productivity via vocational training
– Reform tortuous customs and tax procedures
– Review all sectors to take advantage of the upcoming trade pacts, create facilitated business environment and implements its International Commitments in time without delay
– Work on changing the mindset of the policy makers towards pro-Western faction rather than pro-Beijing one only. We recognize a “drift” towards China in the last decade. We hope Vietnam’s membership to the AEC, the TPP and EUVN FTA will restore balance.
– Improve transport and social infrastructure
– Continue to control inflation rate and reduce red tape. At this stage allow me to congratulate the State Bank of Vietnam which has done a great job re control of inflation in the last years.
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Please do not hesitate to contact Oliver Massmann under omassmann@duanemorris.com if you have any questions or want to know more details on the above. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.