Opportunities abound for foreign investors

Opportunities abound for foreign investors
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VIETNAM has become a magnet for many foreign investors keen to partake in its booming economic growth. From the construction firms to property developers and service industry players, opportunities abound for those looking to get on the “Vietnam economic bandwagon”.

Its membership in the World Trade Organisation on Jan 11 certainly bolstered its standing and marketability in the international arena and the country can look forward to more foreign direct investment (FDI) and expanding trade opportunities.

Vietnam's economy has enjoyed an annual growth of more than 7% since 2001 while its per capita income has doubled to about US$540 in the past decade. Its 8% economic growth last year was the second highest in East Asia, after China, while its annual FDI of over US$10bil, or 4% as a percentage of gross domestic product, is the highest in the region.

The demographics of Vietnam is equally promising – 60% of its population of 86 million are aged 35 and below, and this provides a ready source for the labour and bustling consumer market.

Steven Chu
Foreign investors are encouraged by the continuous improvements they see taking place in the regulatory environment for FDIs.

Gamuda Land Sdn Bhd chief operating officer Steven Chu said although most of the ongoing projects in Vietnam were financed by overseas development assistance facilities, the Vietnamese government was encouraging more private foreign investments.

“It is becoming increasingly easier to do business in Vietnam. In the property sector, we understand the government is looking into more liberalised measures to allow foreign ownership of properties,” he said.

Chu said Gamuda was serious in establishing a long-term business relationship in Vietnam and had set up offices in Hanoi and Ho Chi Minh City.

A significant part of Gamuda's target market for the Yen So Park project in Hanoi will be the expatriate community although they will be on long-term leases since foreigners are not yet allowed to buy property in Vietnam.

Chu said Gamuda would also be targeting the three million Viet Kieu community, or Vietnamese who had fled the country during the Vietnam War and had made good for themselves in their adopted countries, mostly in the US, Europe and Australia. The Viet Kieus are believed to repatriate some US$3bil to US$4bil a year back to Vietnam.

The property sector alone offers immense potential for Malaysian companies to export their expertise.

Rising urbanisation will create a growing demand for companies with expertise in township development and niche lifestyle projects.

The country's growing middle class also means that condominium living and gated and guarded housing will become increasingly popular.

Vietnam faces a severe shortage of quality residential products, Grade A office space, hotel rooms, shop offices and retail centres.

According to international property consultancy Chesterton Petty, the key drivers for the country's real estate market include overseas remittances of US$4bil a year, emerging condominium markets in key cities, conspicuous consumption and changing lifestyles, and the people's lack of access to international real estate investments.

The areas of opportunities include lifestyle residences, condominiums, offices and serviced apartments to cater to an expanding middle class and growing foreign investors and expatriates.

The price of residential properties in Vietnam has escalated to US$1,900 per sq m in Hanoi and US$2,900 in Ho Chi Minh City.

“The average price for luxury apartments is US$1,100 to US$1,900 per sq m and the occupancy rate in serviced apartments has stabilised at around 95%,” Chesterton said in a recent report on Vietnam.

A strong and stable demand for Grade A office space and a limited supply of such property have driven vacancy to less than 1%.

The retail and hotel sectors also offer good growth potential.

Rental for street-front stores in Hanoi are reaching US$120 per sq m with international branded tenants vying for space in high traffic areas.

The largest shopping centre is only 13,000 sq m with rent at US$88 per sq m. Meanwhile, supermarkets are still in short supply. The total retail sales in Vietnam have reached US$20bil last year, a 20.7% increase year-on-year.

Meanwhile, the hotel sector is also seeing much growing potential, going forward. According to the World Travel and Tourism Commission, Vietnam ranks fourth among the top 10 global tourist destinations and the number of tourists is expected to reach 25 million by 2010. – By ANGIE NG