VietNamNet Bridge – Despite some worries about Vietnam’s national economy performance, foreign investors in Vietnam still believe that Vietnam is a “gold mine.”

Vietnamese sell, foreigners buy

In late 2012, the financial investment circle was stirred up by the information that Prime Group, one of the 10 biggest private businesses in Vietnam, sold 85 percent of its stakes to an investor from Thailand. Once again, the buyer in the merger & acquisition (M&A) deal is an investor from South East Asia.

Established as a tile manufacturer, Prime Group has expanded its business rapidly, having injected money in real estate trade, industrial zone and urban area development.

Becoming 40 times bigger than itself 10 years ago, when it started up business, Prime Group is now the biggest tile manufacturer in South East Asia and the fifth biggest manufacturer in the world.

The Thai investor is a familiar name – SCG Group, which has been present in Vietnam for the last 20 years. It is a multi-field group, focusing on five business fields – petrochemistry, paper, cement, building materials and distribution.

The Bangkok Post in late December 2012 quoted President and CEO of SCG as saying that the affair was worth VND5 trillion.

The leadership of Prime Group keeps silent about the affair. Meanwhile, finance investment experts give different explanations on it.

Dinh Quang Hoan, a senior executive of Ban Viet Securities Company, said the Vietnamese side sold stakes to a foreign investor not simply to find a foreign strategic partner. It looks like an action of selling the business definitely when the Vietnamese bosses only hold the nominal power.

There was another noteworthy business affair in mid-December 2012: Geleximco announced the sale of 70 percent of stakes in the Thang Long Cement Corporation to Indonesian Sement Gresik Group for $230 million.

The biggest stake transfer affair, which remains “steaming hot,” was the sale of 20 stakes of Vietinbank to the Japanese Tokyo Mitsubish UFJ worth $743 million.

The Filipino Ayala Group has become a hot name recently when it not only spent $42.6 million to buy 49 percent of stakes in Thu Duc BOO Water Company, but also obtained 47 percent of stakes in the Kenh Dong Water Supply Company. It now has 10 percent of stakes in CII, a technical infrastructure investment company in HCM City, while it is seeking to buy more.

Foreign investors sitting on a gold mine

According to the Bangkok Post, Kan Trakulhoon, President and CEO of SCG did not hide his satisfaction about the deal of buying Prime Group and his intention to heighten SCG’s influences in South East Asia. In mid-2011, SCG bought a factory of Keramika Indonesia Associasi in Indonesia and in early 2012, it increased its ownership ratio in the Filipino Mariwasa-Siam Ceramics.

After the deal with Prime group, SCG would raise its total production capacity to 225 million square meters a year, 48 percent of which would be churned out in Thailand, 14 percent in Indonesia, five percent in the Philippines and 33 percent in Vietnam.

Hoan from Ban Viet Securities Company, when asked to comment about the purchases of Vietnamese stakes in big lots recently, said this should be seen as normal business activities of enterprises, though he said in some cases, foreign investors aim to take over Vietnamese businesses.

Meanwhile, David P. O’Neil, Director of ASEAN Small Cap Fund, showed another reason. He believes that the number of Vietnamese listed businesses to go bankrupted would be less than 10 percent in the next three years.

A similar thing occurred in Indonesia in 1998, when 2/3 of businesses lost their liquidity, but finally, less than 10 percent of them got bankrupted.

Asia handles the crisis another way, not the way followed by developed countries. Therefore, he believes foreign investors are sitting on a gold mine in Vietnam.

DNSG