News / Economy

Vietnam Eyes Foreign Mergers in Bid to Improve Economy

Gabor Szendroi has racked up quite a few miles flitting between Hungary and Vietnam, helping to connect companies in both countries through mergers or acquisitions. On one of his more recent assignments, he spent months advising a Hungarian company that wanted to buy a Vietnamese company, only to see the deal fall through. The Vietnamese company, he said, asked for too high a price.

“I think expectations here are a bit less realistic,” said Szendroi, a partner at IMAP MB Partners, a Budapest-based advisory firm for merger and acquisition (M&A) deals.

While in Ho Chi Minh City last week, Szendroi said these “extreme” expectations are one of several issues plaguing the burgeoning M&A trend in Vietnam. Vietnam’s government says it’s working to solve these problems in order to attract more foreign investors, like Szendroi and his clients.

Encouraging mergers or acquisitions is part of Vietnam’s broader strategy to fuel a disappointing economy that consistently posts growth below 6 percent annually.

Prime Minister Nguyen Tan Dung signed a directive Aug. 5 that lays out a five-year socioeconomic development plan. It said the country should strive for economic growth of 6.5 to 7 percent per year and create favorable business conditions, especially for foreign-invested enterprises.

For their part, public officials readily admit that they have their work cut out for them as they try to restore Vietnam to its former status as a popular investment in Asia’s emerging markets.

“Our country is coping with development challenges in many aspects, such as low efficiency and competitiveness, bottlenecks in the regulatory system, as well as poor infrastructure and human resources,” Nguyen Van Hieu, Deputy Minister of Planning and Investment, said in a speech Thursday at a forum on mergers and acquisitions.

These development challenges are seen as standing in the way of foreign investment. To convince foreigners to pour money into Vietnam, the government is starting with the sector it controls: state-owned enterprises.

Hanoi set a goal to privatize more than 400 state firms by the end of 2015. It hopes this process will make the firms more efficient and therefore attractive to foreign investors who might want to pursue mergers or acquisitions.

Investors say one way the government can reach its goal is by enforcing higher standards for the state companies’ business practices. Many of them prepare for privatization, for example, without professional advisers. Szendroi said advisers would help companies calculate a more realistic valuation, rather than the inflated prices Vietnamese businesses sometimes ask for when targeted by an acquiring company.

Another area that officials say they want to improve is transparency. Lawyer Yee Chung Seck said that if state-owned corporations and other businesses were scrutinized more closely, they would have healthier internal corporate cultures.

“If I walked around all day without a shirt on, I’d do a lot more push-ups,” said Seck, a partner at Baker & McKenzie, where he leads the mergers and acquisitions practice in Vietnam.

But because some companies in the country remain opaque, it is difficult for foreigners to find information about them when considering an investment.

“We need a central source of information run by government ministries,” said Vo Tan Hoang Van, CEO of Saigon Commercial Bank.

Van said the government should have “a contingency plan in terms of liquidity. That creates stability in the market.” Vietnam faced a liquidity crunch in 2012, when the arrest of Asia Commercial Bank’s co-founder triggered a bank run.

Banks are an especially sensitive investment. Vietnam protects the banking industry by allowing foreigners to own no more than 30 percent of a bank’s shares. Private investors say Vietnam may have to consider raising the limit because it is eager to sell off lenders that are dragging down the overall economy.

Policy makers are concerned about banks because of the high percentage of loans that have gone bad, a figure likely in the double digits and higher than official figures. To salvage some of these sick banks, Vietnam hopes to lure foreign investors during their reorganization.

“M&A is a solution, a very important one to restructure creditors and banking institutions in Vietnam,” said Bui Huy Tho, deputy director of the State Bank of Vietnam’s banking supervisory agency. He predicted more acquisitions coming down the pipeline and promised the central bank would help to ensure that “these deals will be carried out quickly.”

You May Like

Lesotho Faces New Round of Violence, Political Crisis

Brutal killing of military officer has sent former leaders back into S. Africa where they're watching anxiously as regional officials head in to try to restore peace More

Video US Diplomat Expects Adoption of Bosnian Massacre Anniversary Resolution

Samantha Power says there's broad consensus about killings in Bosnia's war, but Russia calls resolution 'divisive,' backs UN countermeasure More

UN Report Exposes Widespread Boko Haram Atrocities

Damning report graphically details pattern of vicious, widespread atrocities committed by Islamist militants More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Olympics Construction Scars Sacred Korean Mountaini
X
July 02, 2015 4:10 AM
Environmentalists in South Korea are protesting a Winter Olympics construction project to build a ski slope through a 500-year-old protected forest. Brian Padden reports that although there is strong national support for hosting the 2018 Pyeongchang Winter Olympics, there are growing public concerns over the costs and possible ecological damage at the revered mountain.
Video

Video Olympics Construction Scars Sacred Korean Mountain

Environmentalists in South Korea are protesting a Winter Olympics construction project to build a ski slope through a 500-year-old protected forest. Brian Padden reports that although there is strong national support for hosting the 2018 Pyeongchang Winter Olympics, there are growing public concerns over the costs and possible ecological damage at the revered mountain.
Video

Video Xenophobia Victims in South Africa Flee Violence, Then Return

Many Malawians fled South Africa early this year after xenophobic attacks on African immigrants. But many quickly found life was no better at home and have returned to South Africa – often illegally and without jobs, and facing the tough task of having to start over. Lameck Masina and Anita Powell file from Johannesburg.
Video

Video Family of American Marine Calls for Release From Iranian Prison

As the crowd of journalists covering the Iran talks swells, so too do the opportunities for media coverage.  Hoping to catch the attention of high-level diplomats, the family of American-Iranian marine Amir Hekmati is in Vienna, pleading for his release from an Iranian prison after nearly 4 years.  VOA’s Heather Murdock reports from Vienna.
Video

Video UK Holds Terror Drill as MPs Mull Tunisia Response

After pledging a tough response to last Friday’s terror attack in Tunisia, which came just days before the 10th anniversary of the bomb attacks on London’s transport network, British security services are shifting their focus to overseas counter-terror operations. VOA's Henry Ridgwell has more.
Video

Video Obama on Cuba: This is What Change Looks Like

President Barack Obama says the United States will soon reopen its embassy in Cuba for the first time since 1961, ending a half-century of isolation. VOA White House correspondent Luis Ramirez reports.
Video

Video Hate Groups Spread Influence Via Internet

Hate groups of various kinds are using the Internet for propaganda and recruitment, and a Jewish human rights organization that monitors these groups, the Simon Wiesenthal Center, says their influence is growing. The messages are different, but the calls to hatred or violence are similar. VOA's Mike O’Sullivan reports.
Video

Video US Silica Sand Mining Surge Worries Illinois Residents, Businesses

Increased domestic U.S. oil and gas production, thanks to advances known as “fracking,” has created a boom for other industries supporting that extraction. Demand for silica sand, used in fracking, could triple over the next five years. In the Midwest state of Illinois, people living near the mines are worried about how increased silica sand mining will affect their businesses and their health. VOA’s Kane Farabaugh has more in this first of a series of reports.
Video

Video Blind Somali Journalist Defies Odds in Mogadishu

Despite improving security in the last few years, Somalia remains one of the most dangerous countries to be a journalist – even more so for someone who cannot see. Abdulaziz Billow has the story of journalist Abdifatah Hassan Kalgacal, who has been reporting from the Somali capital for the last decade despite being blind.
Video

Video Texas Defies Same-Sex Marriage Ruling

Texas state officials have criticized the US Supreme Court decision giving same-sex couples the right to marry nationwide. The attorney general of Texas says last week's decision did not overrule constitutional "rights of religious liberty," and therefore officials performing wedding services can refuse to perform them for same-sex couples if it is against their religious beliefs. Zlatica Hoke reports on the controversy.
Video

Video Rabbi Hits Road to Heal Jewish-Muslim Relations in France

France is on high alert after last week's terrorist attack near the city Lyon, just six months after deadly Paris shootings. The attack have added new tensions to relations between French Jews and Muslims. France’s Jewish and Muslim communities also share a common heritage, though, and as far as one French rabbi is concerned, they are destined to be friends. From the Paris suburb of La Courneuve, Lisa Bryant reports about Rabbi Michel Serfaty and his friendship bus.
Video

Video Saudi Leaks Expose ‘Checkbook Diplomacy’ In Battle With Iran

Saudi Arabia’s willingness to wield its oil money on the global diplomatic stage appears to have been laid bare, after the website WikiLeaks published tens of thousands of leaked cables from Riyadh’s Ministry of Foreign Affairs. VOA's Henry Ridgwell reports.
Video

Video In Kenya, Police Said to Shoot First, Ask Questions Later

An organization that documents torture and extrajudicial killings says Kenyan police were responsible for 1,252 shooting deaths in five cities, including Nairobi, between 2009 and 2014, representing 67 percent of all gun deaths in the areas reviewed. Gabe Joselow has more from Nairobi.

VOA Blogs

World Currencies

EUR
USD
0.9012
JPY
USD
122.90
GBP
USD
0.6400
CAD
USD
1.2582
INR
USD
63.438

Rates may not be current.