The Saigon
Times Daily: What are the investment priorities of IFC in Vietnam?
- Simon Andrews: It is really around economic
development. Our primary mission is to support the development of the private
sector, since this is a sector that creates jobs and opportunities for people.
We’re involved in three areas. One is in banking. By developing commercial
micro-finance models, and increasing banks’ lending capacity, we help improve
the access to finance for individuals and small and mid-sized companies.
The second area is infrastructure, both
physical infrastructure and soft infrastructure. Over the next ten years
Vietnam probably needs to invest about US$200 billion in building roads, ports,
power stations, and water treatment facilities. And about half this amount of
money will need to come from the private sector. So Vietnam has to develop new
models for financing those kinds of projects. PPP, which is beginning to move,
can be a solution. Within the second area is soft infrastructure and we invest
in projects that can help improve the quality and access to education, the
quality and access to health services.
The third area that we are looking at is
developing Vietnam’s entrepreneurs. What we want to do is to help them grow
their businesses, help them adopt international standards of governance and
risk management and financial management so that they can become market leaders,
regional leaders, and become globally competitive as well.
You
mentioned the PPP as a new way of financing. Besides that, do you see any other
way of financing infrastructure?
- Financing infrastructure, whether it’s done
through PPP, through the public budget, or through BOO, it’s all going to
require huge amounts of capital. And so it is going to require the development
of capital markets that do not exist at the moment in Vietnam: very long-term
assets, very long-term bonds, and infrastructure bonds.
You also
mentioned entrepreneurship. What do you think of Vietnamese entrepreneurs?
- Vietnamese businesspeople are very shrewd,
very entrepreneurial and good at business.
They tend to be smaller at the moment, but we
are beginning to see some of the entrepreneurial groups rise up.
Can you give
the names of a few companies IFC has invested in so far?
- We have invested in a number of
entrepreneurial companies, in very small companies that are setting up, and in
IT and technology established companies. We were an early investor in Masan
Food. More recently, we invested in Thien Minh to help them make the
acquisition of Victoria Hotels, which was one of the first examples of a
Vietnamese company buying a foreign company.
What are the
criteria in use when IFC chooses a company to invest?
- First, every investment we make must have a
positive development impact, whether it’s is creating jobs, giving people the
opportunity to use a telephone for the first time, switch on a light for the
first time, or open a bank account for the first time, or whether it’s
addressing an environmental sustainability issue. And then, what we really look
at is investing in people who want to grow their businesses, not just to make
money. We want to work with partners who also want to contribute to the
long-term development of Vietnam.
This means
that IFC accepts to lose money also…
- No, it’s important to us that companies we
invest in are profitable. If they are to keep growing, they must make profit.
But anyway,
there must be some risks.
- There are always risks in every investment
that you make. Not every investment that you make is going to turn out well.
But when we invest we expect to make a commercial return on our capital.
Is it OK for
IFC if the return is not high?
- No. We are looking for the same kind of
equity returns as private equity investors. Our loans are also at market rates.
Do you see
any obstacles when you operate here?
- The main biggest challenge at the moment is
obviously the macro-economic situation. It is very challenging, and interest
rates are very high. That is putting a lot of pressure on businesses and banks.
How about
the long-term?
- Another challenge is infrastructure
weakness. The availability of electricity is obviously very important, and more
needs to be done to ensure availability of electricity. More needs also to be
done in terms of transport infrastructure. Vietnam has built a lot of ports
over the last few years, but the supporting infrastructure, the roads going to
these ports and the storage facilities still need to be built. I’m very
encouraged that the Government recognizes these challenges. And they are in the
public debates. So, I’m optimistic with the long-term perspective.
Vietnam has a track record of developing
reform, and creates growth. You may see that foreign companies are still very
interested in setting up factories here. As those companies begin to establish
their manufacturing operations, others will come to fill the supply chain
around them. I think over the next five years Vietnam will be a very attractive
manufacturing destination.
What will be
IFC’s next move in Vietnam?
- Over the next two years, we will continue to
invest in the banking sector and help banks broaden their range of products. We
will also continue to invest in infrastructure, and will also increase our
investments with local entrepreneurs.
Reported by Ngoc Tran
Business & Investment Opportunities
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