VN set to benefit from US-China trade war

Thursday, Nov 29, 2018 08:23

Don Lam, CEO of VinaCapital. — Photo courtesy of VinaCapital

Convened by Horasis: The Global Visions Community, the Horasis Asia Meeting 2018 held earlier this week in Binh Duong Province provided Viet Nam with valuable international exposure and offered numerous networking opportunities for the leaders of major local and foreign companies.

Don Lam, CEO of VinaCapital, spoke to Viet Nam News’s reporter Bo Xuan Hiep about what his company learned from the event, the US-China trade war and its effect on Viet Nam, and the country’s economic outlook.

As the CEO of VinaCapital, what did you take away from the event?

It was great that the Horasis Asia Meeting was held in Viet Nam this year. It was a good opportunity to meet new people and showcase Viet Nam’s development, which in turn could lead to their future investment in Viet Nam.

In addition to meeting a number of people, my takeaway is that the interest in the Viet Nam growth story continues to build as more and more people are discovering the enormous opportunities that Viet Nam offers.

The meeting also reinforced the need for Viet Nam to continue to evolve if it wants to sustain the high growth it has been posting in the past few years.

That means accelerating investment in infrastructure and creating an environment where tech and other sectors associated with the Industrial Revolution 4.0 can grow and thrive. We’ve got to build on the momentum.

The stock markets have been volatile in the last few months, amid US-China trade war tensions. Can you tell us how things will play out?

Viet Nam’s stock market has been a rollercoaster for much of this year, just like other regional stock markets, although Viet Nam has fared slightly better than some other markets.

We expect stock market volatility to continue into 2019, but that’s mainly due to external factors like the trade war, US interest rate hikes, and a weakening Chinese currency.

Fundamentally, Viet Nam’s macroeconomic condition remains strong: GDP growth is targeted for 6.6 per cent in 2019; inflation is under control; manufacturing is expanding; and foreign investment continues to flow into Viet Nam.

Although the stock market doesn’t reflect it, Viet Nam has one of the most vibrant economies in the world, and the investment opportunities here continue to be abundant.

I think the trade war will likely lead to increased foreign direct investment (FDI) in Viet Nam as companies look to move manufacturing operations to the country, and we are likely to see continued export growth.

In the short term, Viet Nam should benefit. But, ultimately, this sort of ongoing tension between the world’s two largest economies is not productive for the global economy and could have ramifications in the longer term if it is not resolved.

Which industries does VinaCapital, one of Viet Nam’s leading asset management firms, focus on? Do you favour start-ups or small- and medium-sized enterprises?

We tend to focus our investments on companies and sectors that are benefiting from the growth of the domestic economy, such as consumer discretionary goods and services, construction materials, healthcare, and education, to name a few.

We have products that invest in different types of companies. For example, we have a fund that only invests in publicly traded companies, with a focus on small- and mid-cap.

VOF, our flagship fund, invests in listed equities and makes private equity investments in companies such as An Cuong Woodworking, IDP, and Tam Tri Medical, as well as in State-owned enterprises (SOEs) undergoing equitisation like ACV.

Meanwhile, VinaCapital Ventures, our new technology investment holding company, is investing in new tech-driven companies like Logivan and FastGo.

So, VinaCapital looks for compelling investment opportunities wherever they may be, listed or private, small or large.

Ensuring that innovative firms have easier access to finance in the early stage of development was one topic at the meeting. How can this be achieved?

Banks and other lending institutions need to be more flexible when it comes to providing loans and lines of credit to small- and medium-sized enterprises (SMEs).

The limited access to capital is probably one of the key factors holding back Vietnamese businesses.

Other countries in the region have experienced similar challenges and have seen the rise of fintech solutions that are able to fill the gap via digital SME lending platforms.

I fully expect to see regional players expand to Viet Nam to offer their solutions.

There is enormous demand for finance among Vietnamese firms, which need funds for technology and human resource development to keep up with the Industrial Revolution 4.0. Have financial companies met this demand? What are the factors at play here?

The availability of financing for private enterprises has long been a challenge, and it is one of the issues that the Private Sector Advisory Council, of which I am vice chair, is working on.

There are a number of factors at play. Large State-owned banks still tend to favour lending to SOEs.

But there has been progress. Viet Nam’s stock markets are now a viable option for larger businesses to raise capital through stock sales. Some of the largest companies are selling corporate bonds.

Meanwhile, companies like VinaCapital also invest in growing businesses via private equity transactions.

And, as I mentioned earlier, successful fintech platforms that offer financing for small businesses in particular are likely to enter Viet Nam, given the enormous opportunities here and the success they’ve had in other markets.

Could you tell us about your company’s plans and vision for the future?

VinaCapital is celebrating its 15th anniversary this year, and I am proud of what we’ve achieved thus far.

Foreign investor interest in Viet Nam continues to rise. We had a record attendance at our annual conference this year.

But I am even more excited by what the future holds. The investment environment has come a long way since 2003, and VinaCapital is evolving in terms of the products we offer to investors so that we can continue to play a role in the country’s continuing economic transformation.

VinaCapital Ventures is one of the things I’m most excited about. We were one of the first venture capital firms in Viet Nam a decade ago, when Viet Nam’s tech scene first appeared on investors’ radar screens.

Now we’re seeing a new wave of tech businesses, both start-ups and more established companies, and Viet Nam is gaining attraction as the next hotbed of digital innovation.

But it’s going to take time, money and effort to realise that potential, and VinaCapital Ventures is how we will do our part in making that happen. — VNS

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