Last updated: 16:44 - September 4, 2006
New wave of FII to flow into Vietnam http://www.nhandan.com.vn/english/business/040906/business_n.htm
Financial experts have forecasted that a new wave of foreign indirect investment (FII) will flow into Vietnam through different channels in the near future due to the country's economic-political stability as well as its accession to the World Trade Organisation (WTO).
Dominic Scriven, Director of the UK fund management firm Dragon Capital, said Vietnam is likely to attract around US $500 million in FII this year, representing one-third of the total amount so far.
Vietnam saw the first inflow of FII when seven foreign investment funds, including the Vietnam Lazard Fund, Templeton Vietnam, and Beta Fund, were set up in the country with a combined capital of US $700 million.
However, these funds withdrew from the Vietnamese market after the 1997 economic crisis in Asia except for the Vietnam Enterprise Investment Fund run by Dragon Capital.
Scriven said that since 2000, foreign investors have resumed their interest in the Vietnamese market. Dragon Capital and foreign investors have made profits from their business activities in Vietnam, he said, adding that this fact is making the country more attractive to other investors.
The second wave of FII began in 2002 as foreign investors found great business opportunities in Vietnam's equitisation of State-owned enterprises. The event was marked by the appearance of the US $18.5 million Mekong Enterprise Fund.
The country has since then seen the establishment of over 10 funds with a total capital of more than US $1 billion. Among those, the latest fund is Vietnam Holdings capitalised at US $112 million, 60% of which was mobilised from Swiss investors.
However, the amount of capital remained modest compared to the demand of Vietnam's developing economy, which like other regional ones, have considered investment funds and financial institutions as major FII attraction channels.
Nguyen Quang Vinh, Director of the Bao Viet Securities Joint Stock Company (BVSC), believed that the flow of FII into Vietnam will increase sharply in the coming future, especially after the country joins the WTO, forming a new wave of FII.
Vinh revealed that many foreign investment funds plan to invest in Vietnam, citing a 120 million USD fund invested by Vietnam Holding. These funds, he said, will be much larger than the existing ones such as Dragon Capital, Mekong Capital, and VinaCapital.
According to Vinh, the PPF Group, one of the Czech Republic's leading financial firms, is expected to establish its investment fund in Vietnam with a registered capital of US $50-60 million in the first phase. Another group from Israel also intends to pour investment into the country.
In addition, some of the fund management companies operating in Vietnam plan to set up more funds to mobilise capital.
Together with the establishment of investment funds, an increasing number of foreign individuals and organisations now have invested in the Vietnamese securities market recently.
The State Securities Commission's Securities Custody Centre has averagely provided trading codes for between 40-50 foreign investors a month, Vinh said.
Explaining the rapid increases in FII, Scriven said many people consider Vietnam a growing economy. They appreciated Vietnam's competitive capacity, investment opportunities, as well as its integration process, State-owned enterprise and financial-banking reform programmes, he added.
To lure more FII, the Dragon Capital director suggested that Vietnam should scale up its financial market by developing the stock market and combining the equitisation of State-owned enterprises with listing their shares. Vietnam should also build a healthier and more transparent market and to improve its laws, Scriven said. (VNA)
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