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Vietnam A Compelling Growth Story. University of Michigan Business School February 2008. Speaker: Mr. Bradley Lalonde. BIDV – Vietnam Partners Investment Management (BVIM): a joint venture between Bank for Investment and Development of Vietnam (BIDV) and Vietnam Partners LLC (VP). v5.9.

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Vietnam a compelling growth story

Vietnam A Compelling Growth Story

University of Michigan Business SchoolFebruary 2008

Speaker: Mr. Bradley Lalonde

BIDV – Vietnam Partners Investment Management (BVIM):

a joint venture between Bank for Investment and Development of Vietnam (BIDV)

and Vietnam Partners LLC (VP)

v5.9


Vietnam
Vietnam

BIDV - Vietnam Partners Investment Management


Vietnam the door is open
Vietnam – The door is open.

BIDV - Vietnam Partners Investment Management


Executive summary
Executive Summary

  • The Vietnamese Economy and Investment Climate

  • Vietnam has recently been regarded as a “New Asian Tiger” thanks to a rapid growth (second fastest in Asia) based on structural changes, political and social stability, and global integration of its financial markets.

  • The investment opportunities over the next 3-5 years will result from reforms made over the last decade:

    • Privatization of State-owned enterprises (SOEs), which is expected to accelerate over the next 36 months

    • Privately owned firms seeking growth/expansion capital

    • Vietnam’s capital market becoming an important source of investment funding and liquidity

BIDV - Vietnam Partners Investment Management


Contents
Contents

Country Overview

A Growing Economy

Investment Landscape

Investment Opportunities

BIDV - Vietnam Partners Investment Management


Country overview
Country Overview

  • Favorable natural conditions bring competitive advantage

  • Location: Southeastern Asia, bordering the Gulf of Thailand, Gulf of Tonkin, and South China Sea, alongside China, Laos, and Cambodia

  • Area: 329,314 sq km; Coastline: 3,444 km

  • Natural resources: phosphates, coal, bauxite, chromate, offshore oil and gas deposits, forests, hydropower, soft-commodities

  • Geography: Extending 1,650 km north to south, only 50 km across at narrowest point

  • Climate: Tropical and semi-tropical

Source: CIA Factbook

BIDV - Vietnam Partners Investment Management


Country overview1
Country Overview

  • Young population provides large labor force

84 million population; growing at 1.2 % per annum

Over 60 % of population below 30 years old

90 % literacy rate

Percentage of labor force/ total population increasing rapidly

GDP per capita (2006) 723 USD

Male

Female

Source: BIDV Securities Company

BIDV - Vietnam Partners Investment Management


Country overview2
Country Overview

  • Economic Structure

Contribution of Agriculture is decreasing.

Contribution of Industrial and Service sectors is increasing.

Today, the private sector contributes app 2/3 of total GDP !

Source: General Department of Statistics

BIDV - Vietnam Partners Investment Management


Country overview3
Country Overview

BIDV - Vietnam Partners Investment Management


Contents1
Contents

Country Overview

A Growing Economy

Investment Landscape

Investment Opportunities

BIDV - Vietnam Partners Investment Management


A growing economy
A Growing Economy

  • Vietnam has made tremendous progress on wide-ranging platforms

BIDV - Vietnam Partners Investment Management


A growing economy1
A Growing Economy

  • Vietnam has entered a period of sustainable high growth

  • GDP growth exceeded 8.3% in 2007, the sixth consecutive year of growth above 8%

  • Target GDP growth of 9.0% in 2008

Source: General Statistics Office; Economist Intelligent Unit

BIDV - Vietnam Partners Investment Management


A growing economy2
A Growing Economy

Export and Import 2000 - 2007

Source: General Statistics Office

Source: General Statistics Office; World Bank

  • Economic Performance

FDI reached $20.3 billion in 2007. Two-way trade exceeds GPD by a factor of 1.5.

BIDV - Vietnam Partners Investment Management


A growing economy3
A Growing Economy

Industrial Output 2002 - 2006

Source: General Statistics Office; Ministry of Industry

Source: World Bank

  • Economic Performance

BIDV - Vietnam Partners Investment Management


A growing economy4
A Growing Economy

  • 2008 might be another year of spectacular growth.

BIDV - Vietnam Partners Investment Management


Contents2
Contents

Country Overview

A Growing Economy

Investment Landscape

Investment Opportunities

BIDV - Vietnam Partners Investment Management


Definitions
Definitions

  • Local Terminology

  • Equitization - State Owned Enterprises (SOEs) issue joint-stock and/or sell shares to private investors (often less than 50% in the first round of privatization). The process typically takes the form of an auction, after which the SOE turns into a joint-stock company, in theory tradable on the local Over-The-Counter (OTC) market.

  • OTC stock– Securities of joint-stock companies after they have converted from private limited or SOE status. OTC securities can be traded on the less regulated and liquid OTC market, prior to a formal listing.

  • IPO – First time distribution of stock to over 100 investors; no formal exchange listing or new share issuance is required. An IPO often goes hand-in-hand with a company’s transition from private limited to joint stock company.

  • Foreign investor – Vietnam imposes ownership restrictions on foreign (non-Vietnamese) investors for listed, OTC companies and SOEs; generally 30-49% foreign ownership allowed in most sectors, except “strategic industries” (e.g. banks).

BIDV - Vietnam Partners Investment Management


Investment landscape
Investment Landscape

  • Vietnam’s capital markets are developing rapidly

  • A booming private sector is turning to the capital markets

    • Number of listed companies jumped from 32 in 2005 to 248 in 2007; over 6,000 OTC securities

    • Average trading liquidity up app. 5-times since mid-2006, to app. US$ 60 million/ day

    • Increasing breadth & depth of Vietnam’s capital markets due to:

      • Ongoing equitization of SOEs

      • Improved regulatory framework of informal trading segments (OTC) - conversion to full listing

      • Private enterprises taking advantage of new access to capital

      • Proliferation of new securities companies

Fast growing market cap/ GDP, but remains low compared to other countries (1% in 2003 and 40% in 2007)

Sources: BIDV Securities Company; Bloomberg

BIDV - Vietnam Partners Investment Management


Investment landscape1
Investment Landscape

  • Issues negatively affecting the markets

  • Sudden introduction of banks’ lending activities against securities

  • Introduction of capital gains taxes

  • Sticky foreign ownership restrictions

  • Flawed privatization mechanism (e.g. set minimum valuations)

  • Poor corporate governance remains a key concern

BIDV - Vietnam Partners Investment Management


Contents3
Contents

Country Overview

A Growing Economy

Investment Landscape

Investment Opportunities

BIDV - Vietnam Partners Investment Management


Investment opportunities
Investment Opportunities

  • Rich investment opportunities across all target groups

Formal Listing

Equitization

Source: General Statistics Office, BVIM as 12/31/06

BIDV - Vietnam Partners Investment Management


Investment opportunities1
Investment Opportunities

Fastgrowing private sector

Transportation

Privatization of former SOEs

Infrastructure

BIDV - Vietnam Partners Investment Management


Investment opportunities2
Investment Opportunities

  • Accelerating equitization schedule creating strong SOE deal flow

Number and size of equitized companies have increased significantly since 2001: 3060 SOEs have been equitized to date

Major state-owned corporations are scheduled for equitization in the next 3-5 years

Continued government review of equitization pipeline & methodology to benefit the disciplined investor in the long run

SOEs to be equitized BV* Sector 2007 2008 2009

(in $mln)

Vietnam Airlines 360 Airlines ●

Vietcombank 687 Banking ●

Incombank 562 Banking ●

BIDV 467 Banking ●

VBARD 406 Banking ●

Sabeco 340 Beverage ●

Habeco 170 Beverage ●

Vinasteel Steel ●

HUD Construction ●

Saigon Real Estate 63 Real Estate ●

Vietnam Paper 65 Paper ●

Haprosimex Trading ●

Source: General Statistics Office, as of 31/12/2006

* Estimated book values

BIDV - Vietnam Partners Investment Management


Investment opportunities3
Investment Opportunities

  • Private sector potential is significant and growing

BIDV - Vietnam Partners Investment Management


Thank you q a
Thank You - Q&A

BIDV - Vietnam Partners Investment Management


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