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Investors see retail sector as most attractive
With Viet Nam trying to escape the economic crisis, investors are now putting their confidence in the retail sector.
A recent study carried out by the consultancy firm Grant Thornton Vietnam titled Private Equity–Vietnam Investment Environment and Outlook Survey shows that 70 per cent of the respondents saw retail as an appealing sector when asked to rank the attractiveness of selected industries within Viet Nam for private equity investment.
The survey involved 169 selected participants covering a broad cross-section of the Vietnamese and foreign investment community with an interest in private equity investment.
Industries surveyed included healthcare and bio-tech, oil and gas, agriculture, real estate, transport, financial services, manufacturing and hospitality and tourism.
Healthcare and biotech ranked second with around 65 per cent of the respondents considering it as positive. The remaining respondents considered them as neutral, and no one saw them as negative.
On the flip side, only 23 per cent and 26 per cent of respondents rated hospitality and tourism and manufacturing, as positive while around one-third of them rated the two sectors as negative.
"The robustness of Viet Nam’s domestic economy and the opportunities that will arise as this sector is liberalised further makes retail an attractive investment option," said Matthew Lourey, corporate finance director at Grant Thornton.
He added that there was a continued shift towards modern trade within Viet Nam, which fosters new investment opportunities.
The survey also showed that 88 per cent had a substantial problem dealing with red tape while 12 per cent did not consider this as serious.
The country’s legal system was also viewed as a substantial obstacle for investment, according to 85 per cent of respondents.
When asked about the most important factor that they considered when investing in Viet Nam, 25 per cent identified transparency of business activities when making investment decisions.
Meanwhile, 24 per cent cited corporate governance as the biggest concern about Vietnamese companies. The issue was even more important in light of the large portion of family-operated businesses in the country.
"There is, however, an increasing trend for Viet Nam-based companies to recognise this and many are now taking the opportunity during the global slowdown to investigate and commence the groundwork for sound corporate governance and reporting functions," noted Grant Thornton Vietnam’s managing partner Kenneth Atkinson.
HCM City a financial centre?
Several years ago, HCM CityPeople’s Committee mapped out a plan to develop the city into a financial centre of the country, yet it could take a long time for the city to reach the target.
Experts at a recent seminar said the city still lacked various conditions for doing so.
Prof Tran Ngoc Tho of the HCM City Economics University said a financial centre, generally, contains financial and banking services on both national and global scales.
He said HCM City had the initial conditions for such a centre, which included the market capitalisation volume of the stock market, the stock market’s growth trend and the number of international financial institutions and branches of multi-national companies.
"However, it’s also easy to recognise that the city has problems such as a polluted environment and deteriorating infrastructure. Multinational companies would face difficulties in supplying their financial services on such a foundation," said Tho.
Conditions elsewhere in the world for financial centres were of high standard, he added. The Securities Industry Association in the US, for example, requires a financial centre to have transparency, an effective and fair financial market, free capital flow and convertible currency, a fair tax system, low business costs and high-quality infrastructure.
Dr Su Dinh Thanh, also from the HCM City Economics University, proposed that the Government set up a committee for the promotion and development of the HCM City financial centre.
This body would build a financial centre development strategy, co-ordinate related organisations to review policies and work out a legal framework for the development of the centre.
The city should be further empowered in the city’s financial management. On the part of the Ministry of Finance, more policy decisions must be made to promote both securities demand and supply, reform the legal system and accounting and auditing standards, Thanh said.
Meanwhile, the State Bank of Viet Nam should set up a monetary exchange in HCM City to create a financial infrastructure that would support the bank to implement monetary policies, and links with the HCM City Stock Exchange for the purpose of accommodating interest rate and capital demand and supply.
According to Do Minh Tuan, deputy governor of the central bank, active use by businesses and consumers of financial services is an important factor for the city to become a financial hub. Currently only 8 percent of Viet Nam’s population have accounts at banks.
Commercial property news
The joint-stock company Thoi Trang Viet (Viet Fashion) recently opened a large street-front store on Dong Khoi Street, one of the most expensive locations in HCM City’s central business district. The company previously had opened another on downtown Nguyen Hue Street.
Viet Fashion makes garments under two brand names of NINOMAXX and N&M.
Marc Townsend, managing director for the real estate services provider CBRE, said Viet Nam’s real estate market and the retail sector in particular was being driven by local companies producing local products.
"Though growth in retail sales has slowed, domestic demand has proved more resilient than in much of the rest of the world," said Marc.
Saigon Paragon in Phu My Hung District opened in March with an occupancy rate of 80 per cent.
"Local retailers continue to open in key locations to build brand awareness and visibility, and they will remain the most vigorous players in the market," he said.
He also said the number of new international entrants had dwindled, and brands already present had delayed expansion programmes.
The business district’s shopping centre rents increased during the first quarter by 1.3 per cent over the previous quarter, while shopping centres elsewhere dropped around 6.7 per cent.
Marc said retail rents in the central district were expected to remain stable while the centre’s fringe area could fall between five and 10 per cent. Other areas outside the downtown might face greater downward pressure.
Before 2013, around 1.4 million sq.m of ground floor is planned to be launched, but only half of the figure is likely to be completed on schedule.
The development trend is toward projects with retail areas larger than 100,000 sq.m built in emerging suburban locations.
Many of these projects are expected to move forward to meet anticipated demand when the market revives, according to the CBRE Managing Director.
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