Vietnam on the mend
More Thai investors should consider getting a foothold in Vietnam as its economy rebounds, says Bangkok Bank.
Published: 14 Jan 2013 at 10.41
Newspaper section: Asia focus | The Bangkok Post
THARABODEE SERNG-ADICHAIWIT, General manager for Vietnam, Bangkok Bank
Despite a weak economy, high inflation, and the banking and property market malaise seen throughout 2012, the year ahead could be much different for Vietnam, says Bangkok Bank’s top executive in the country.
“In comparison to other countries in the region, the competitiveness of tourism development in Vietnam is still uneven and not commensurate with the potential. This is a remarkable opportunity for foreign investors”
With the economy starting to recover, 2013 could be an excellent time for Thai investors to explore and seize the opportunities presented, said Tharabodee Serng-Adichaiwit, general manager of Bangkok Bank’s Vietnamese operations.
“I still strongly believe that the problems we have been seeing were only short-term turbulence for Vietnam’s economy, as we can see that the government is putting its best effort into resolving these issues. Once the fluctuations stabilise, the economy will rise again”, he said in a recent interview with Asia Focus.
Although concerns exist about high debt caused by high non-performing loans (NPLs), Mr Tharabodee said the government was determined to encourage mergers and acquisitions, resulting in fewer banks but greater financial strength in the system overall.
As well, he said, inflation has fallen to manageable levels, the Vietnamese dong has been stabilising, foreign reserves are increasing and the budget deficit is shrinking.
“The trade balance is doing a whole lot better. After almost a decade of suffering from a current account deficit, it is time for Vietnam to start enjoying a surplus. Although the figures are not very high, this is quite good news, thanks to export growth and a rise in remittances,” he said.
Still, the business climate has been volatile, if one looks at data from the Business Registration Division at the Ministry of Planning and Investment.
Around 55,000 enterprises in Vietnam filed for bankruptcy last year, while around 65,000 new businesses were registered. The net gain for the year of 10,000 is encouraging many enterprises have faced liquidity problems. For most, bank loans are not an option because interest rates are still too high, though they should ease this year.
“A lot of local companies are now willing to sell through merger and acquisition deals, which could provide an excellent opportunity for foreign investors to find some cheap assets particularly in commercial property, manufacturing plants, and even including hotels that normally are offered at a very high price,” said Mr Tharabodee.
He said Thai investors should take the opportunity to be part of the growing tourism industry in Vietnam by filling the gap in the upscale hotel market to cater to the rising numbers of foreign visitors.
Currently, there are still quite a number of nominally high-grade hotels and resorts that are poorly run, and thus unable to satisfy traveller demand in a country with many unspoiled and yet-to-be-discovered tourism destinations.
“In comparison to other countries in the region, the competitiveness of tourism development in Vietnam is still uneven and not commensurate with the potential,” said Mr Tharabodee. “This is a remarkable opportunity for foreign investors, which usually doesn’t come often and will not stay for long.
“Thai tourism investors in particular, who had been through the same process years ago, will know exactly what will be happening in Vietnam.”
According to the study by the Vietnam National Administration of Tourism, the country attracted 6.5 million international tourists in 2012, a year-on-year increase of 6.3%. Around 5,000 hotel rooms are expected to enter the market this year but standards vary from very low to very high.
Bangkok Bank last year secured its future in Vietnam by receiving a licence extension for 99 years (until 2111), the longest ever given to a foreign bank. The bank set up its first branch in Vietnam in 1961 but left in 1975 when the Communists took control of the country. It returned again in 1992 and has since supported more than 100 foreign direct investment (FDI) projects in the country.
“Each province in Vietnam is making efforts to attract investors by offering one-stop service centres,” said Mr Tharabodee. “Investors can receive permission and start constructing their factory in less than three months. Therefore, it is recommended that investors come by themselves rather than through joint ventures.
“However, if necessary, in partnering with local businesses, the ability to exert major decision-making authority is essential.”
He encouraged Thai companies to relocate their plants to Vietnam in order to enjoy lower labour costs and political stability. Vietnam today has a population of 90 million people with a median age of only 27 and a literacy rate of 94%. The enthusiasm and strong work ethic of its young labour force has been a selling point.
The BBL executive acknowledged that there was a shortage of qualified middle managers in the country, but he believes investors can overcome the problem. “The best way is to recruit some highly qualified new graduates and train them well. If we can make them understand the business and enjoy the working environment, they will stay with us for a long time and become very successful managers who will turn out to be valuable assets for the company,” he said.
“However, investors also need to know that in the meantime there are some challenges ahead if they want to set up a business in Vietnam, such as vague laws and regulations, obsolete infrastructure, currency fluctuations (which may affect company performance), pollution issues, power shortages, particularly in dry season, and labour quality.”
Bangkok Bank in Vietnam is keen to serve as the key information centre for Thai investors looking to explore the country, he added. “The economic cooperation between the two countries will be strengthened as we all are approaching the coming integration of the Asean region.”
