5 7月 2018
Vietnam offers significant opportunities to those willing to adapt to the nuances of working in a developing nation, but foreign investors must follow due diligence and be willing to take on a higher level of risk than they would in a more mature market. These were the views of a highly experienced panel who discussed the opportunities for developers seeking to operate in Vietnam.
The discussion took place at the recent RICS Infrastructure and Real Estate Development Conference in Ho Chi Minh City and featured the most incisive industry professionals currently operating in the Vietnam market. Moderated by Stephen Williams, Head of Standards, RICS, the panel comprised: Stephen Wyatt, Country Head, JLL Vietnam; Michael Piro, Chief Operating Officer, Indochina Capital; Martin Ho, Commercial Director, Vingroup; and David Blackhall, Managing Director, VinaCapital.
Congestion is a growing issue in Vietnam’s major cities, and major projects, such as the Metro rail systems in Ho Chi Minh City and Hanoi are critical. However, the pace of infrastructure development is slow, and often affected by substantial delays.
Accordingly, developers, whose projects hinge on access to developments or service infrastructure, for example, should build significant delay-risk into their feasibility studies and sensitivity analyses. In some cases, even a two-year delay may not be enough. Projects have been stalled, and even killed completely, by infrastructure delays.
It is also of note that enabling infrastructure, such as schools, hospitals, and amenity space has, to an extent, been overlooked, risking poor placemaking; developers may have to factor this in to their feasibility studies.
If you were not able to make the conference, you can watch this panel online below (1 hour 8 minutes). Gain 1 hour Informal CPD
There are both advantages and disadvantages to both local and foreign developers operating in Vietnam, but often, working together in some form of joint venture could be more favourable.
Due to the bureaucratic landscape, local developers are often able to secure deals faster than their overseas counterparts, access larger sites, and, most importantly, are not burdened by limited Land Use Certificate tenures, which are capped at 50 years for foreign purchasers. However, as overseas developers can access larger volumes of offshore capital, they are able to produce higher-quality products. Inevitably, overseas developers would be well-placed to secure a strong local partner who can help them bypass bureaucracy and access a wider variety of sites. Foreign developers, especially new incumbents to the market, must be flexible, adaptable, patient, and above all, acutely aware of the potential pitfalls.
The panel were asked which asset classes were likely to see the most rapid growth in the short- to mid-term. The consensus across the panel was simply, everything. However, after being pressed further, panelists agreed that there was a significant amount of support for logistics assets: warehousing, distribution, or cold storage.
E-commerce is seeing a significant volume of growth in Vietnam, and, as such, assets that support this sector will see equivalent growth as demand increases. The growth in e-commerce does, of course, have an adverse effect on traditional retail. However, there is a shift in mindset that sees traditional malls and shopping centers develop into more social spaces, with food and beverage outlets, children’s play centers, and entertainment venues taking over the space left vacant by the retailers.
Panelists agreed that local-bank financing is becoming harder to obtain and that strong relationships built on a foundation of a solid-track record are critical. Developers that rely on overseas capital should consider the right vehicle to bring those funds “on-shore”. This will allow them to benefit from the various tax incentives that the Vietnamese government have put in place to attract foreign investment, as well as ensure that future remittances from Vietnam can easily take place.