VietNamNet Bridge – Foreign businesses have withdrawn
investment capital and stopped pouring money into the real estate market
without any statements about the plans to come back to the market.
Backing out because of capital exhaustion?
VinaCapital has offered to sell
its stakes in Metropole Hotel in Hanoi. The decision has been explained by Andy
Ho, VinaCapital’s Managing Director as a strategic move which would bring long
term benefits to the fund. In fact, withdrawing capital after certain periods
of making investment is quite a normal thing for investment funds. The
investment portfolios are re-assessed once every six months by independent
firms.
According to Don Lam, General
Director of VinaCapital, it has withdrawn all the capital from 10 projects out
of the 36 projects it once invested, and withdrawn a part of the capital
contribution from one project.
Also according to him,
VinaCapital won’t make new investments in the real estate sector, while it
would focus on withdrawing capital from existing projects and refunding capital
to shareholders.
VinaCapital is not the only
investor who decides to quit real estate projects. The movement of leaving the
real estate market has been explained by the fact that the market has become no
more profitable. The economic downturn, plus the real estate market fall both
have made foreign investors shrink back.
Phan Xuan Can, President of Soho
Vietnam, also commented that withdrawing capital would help investors
restructure their portfolios, once they meet financial difficulties.
Nevertheless, Dang Van Quang, a
senior executive of Navigat, a real estate consultancy firm, does not think
that foreign investors quit the market because of their financial problems.
Quang said the global economic
crisis is not the main reason behind the investors’ decision to give up real
estate projects, because most of the foreign investors who injected money in
Vietnam are the big ones with powerful financial capability.
“I believe that the actual reason
behind their leave is the business confidence index increase in Vietnam. Some
institutions have recently released the reports showing that foreign investors’
confidence on the Vietnamese business environment has decreased.
The disappointment
Agreeing with Quang, some
economists said that once the business environment degrades, this would prompt
investors to leave the market.
The latest survey of European
Chamber of Commerce and Industry EuroCham showed the decrease in the confidence
of the European business community in the business environment in Vietnam.
More than 1/3 of the polled
businesses gave pessimistic comments about the current situation. 50 percent of
businesses fear that the high inflation would harm their business in medium
term.
Especially, European enterprises
also think pessimistic about the macroeconomic performance with only 28 percent
of businesses thinking that the situation would be gradually improved.
The Vietnamese real estate market
had witnessed an overly hot development over the last few years. Meanwhile, the
lack of the transparency and the massive investment have led to bad
consequences. The situation has been worsened by the economic downturn, which
has blocked the capital inflow into the real estate market. As a result, the
market has got frozen.
Foreign investors have repeatedly
said that transparency is the most important thing for the real estate market.
Meanwhile, this is the thing the market is lacking.
Under the current regulations,
foreign non-residential units in Vietnam are now allowed to rent or buy
Vietnamese real estate. Meanwhile, residential foreign individuals and foreign
invested enterprises set up in Vietnam can buy apartments for accommodations,
but in limited quantity. The tightened policies make the market demand weak.
An Duong
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