Consulting firm Grant Thornton (Vietnam) has released a report on private equity that shows an encouraging improvement in respondents' belief in higher investment activities in the next 12 months.
In the bi-annual survey conducted in the second quarter of 2015, 86 per cent (compared to 72 per cent in the previous survey) of respondents, who are from investment funds, advisory/legal firms, securities companies, ad private and institutional investors, forecast investments to rise.
They cited several reasons.
First is the recovery in the economy that is boosting consumer confidence and potential for growth across industries.
Secondly, joining global and regional partnerships like the TransPacific Partnership and the Asian Free Trade Area (AFTA) provides many investment opportunities that benefit both local businesses and foreign investors.
Thirdly, the improvement in legislation shows a positive commitment towards investors, with the government addressing the need for reform in both private and public sectors. This is providing opportunities for investors to make investments in strong local enterprises which have good operating systems, market share, and a trained workforce in place.
It is expected that the total value of M&A deals this year will beat the 2012 record of US$5.2 billion. The figure could reach $20 billion between 2015 and 2018.
Oil and gas, food and beverages, and clean technologies are the leading sectors which are seen as especially attractive for investment.
For 72 per cent of PE respondents, the outlook is positive, unchanged from the previous survey two quarters earlier, thanks to a lot of positive news during the first half of this year.
Significant legislative changes and increasing opportunities for foreign investments have boosted investors' confidence in the recovery of the economy.
In the previous survey, the outlook was negative for 12 per cent of respondents, but the figure has fallen to 7 per cent now.
In the first quarter GDP growth reached 6 per cent, a milestone that has been eluding Viet Nam since 2011. In the second quarter GDP growth was 6.44 per cent, further confirming the economic recovery.
With regard to the legal framework, two significant positive changes were introduced in H1 — the Public Investment Law followed by a decree on public-private partnership strengthening the legal framework for partnerships between the government and enterprises in infrastructure investment and the increase in foreign ownership limits in listed companies to 60 per cent.
Nevertheless, long-standing problems still exist, including slow reform of SOEs, inadequate infrastructure, corruption, and red tape.
Government red tape remains the most critical obstacle for PE investors, according to 85 per cent of respondents. Though there is a slight decrease of 3 percentage points since the last survey, it appears there has not been any major improvement in this regard.
A similar situation is noted with regard to corruption, voted by 83 per cent, which has been repeatedly marked as the most critical obstacle in the last few years' reports.