Opportunities, challenges go hand in hand

Dang Doan Kien.

While an increasing number of foreign fund management firms are planning to divest from Viet Nam, others are confident about the future of the Southeast Asian economy. Viet Nam News Agency spoke to Aureos Capital director Dang Doan Kien about investment funds in Viet Nam.

The global economy's woes are expected to continue this year. What is the situation like for financial funds in Viet Nam?

Many people believe it will be difficult to find investment opportunities this year, but personally, I see a different picture. When the economy is unstable, we often see, along with greater risks, more opportunities. Funds will have to figure out how to find them.

There are plenty of companies and projects in Viet Nam but they are limited in terms of scale and development depth. So it will take our company, as we look for investment opportunities, a longer period of time. Especially, the process of evaluating projects here, where the markets are not stable.

In addition, the management ability of most businesses is still at a low level. When an investment fund or a big company acquires a smaller one, it is hard to synchronise the two entities to generate resonant strengths. But in my experience, once the two entities can get through this challenge, investment activities often bring about good business results.

Investors also pay close attention to economic stability and policies. According to statistics from other markets, 70 per cent of an investment project's success is dependent on the economy and the specific sector. Only about 20 per cent is associated directly with the company. It means that if a company chooses the right field and country to invest in, it already has done 70 per cent of the work.

When operating in an emerging market, unfavourable economic conditions such as exchange-rate fluctuations and changes in policies can result in financial funds seeing a below-average investment ratio.

What criteria do financial funds use when making investment decisions?

Each fund has its own mandate. Some invest in sectors such as healthcare, minerals, real estate and infrastructure, while private equity funds invest in production companies, exporters or consumer goods.

Overall, funds set up similar core criteria, including a professional management team and transparent corporate governance. Besides, funds have become more interested in socially responsible investment. They care about preferential regimes for employees, tax policy compliance and waste disposal. Other standards include corporate valuation, business strategies and expected profits of the companies in which funds wish to invest in.

Although many of the foreign funds have high standards, they still apply Viet Nam's criteria when operating inside the country. Meanwhile, Viet Nam is a member of many regional and international organisations, so its standards are increasingly matching the international system. The problem is how enterprises comply with them and how State agencies supervise them.

In your opinion, what benefits have financial funds found in the Vietnamese market?

These funds all recognise the spectacular growth opportunities in Viet Nam's emerging market. A major advantage the country has is its dense and young population. So there is potential when it comes to consumer products, agricultural and services serving the young population such as communications, utility software, education, health and beauty care. Real estate has potential, too, although the sector is facing a lot of troubles.

However, I must emphasise that the most important factor is the country's macroeconomy. Here most foreign investors have been cautious, despite the prospect of long-term development.

Viet Nam's market, particularly small – and medium-sized enterprises, is one of our fund's leading investment destinations and it is where most of our money is allocated. — VNS