Tag Archives: Vietnam real estate

Vietnam’s Capitalism Learning Curve

Vietnamese authorities are disappointed by the results of this year’s initial public offerings of state-owned enterprises.  The companies were able to sell only 27% (84 million) of the more than 300 million shares offered –and foreigners bought only 10 million.  Proceeds totaled $49 million.

The lack of enthusiasm among investors is being attributed to the offerings being mostly companies doing public works business in the property sector that has experienced falling prices.  Also, Vietnam’s economic recovery has been relatively weak so far, and the government is not expected to boost public works spending.

But that doesn’t explain why investors are repelled by Vietnam’s state-owned companies at the same time they have driven up Vietnam’s stock prices by nearly 20%.

The explanation may be simpler:  The companies are pricing their shares higher than the market wants to pay for them.

Vietnam’s government will have more success privatizing their businesses once it fully accepts the way capitalism works.  In capital markets, the government doesn’t get to decide how much a company is worth; the market does.

When Vietnam lowers its expectations in pricing its IPOs, the country will successfully sell shares in the 432 state-owned enterprises scheduled to be privatized by 2015.


The Road to Vietnam’s Own Las Vegas

If money speaks louder than tradition in Vietnam,  the country’s longstanding resistance to exposing its population to LasVegas style gambling and entertainment may soon end.  That’s because Sheldon Adelson recently visited Vietnam to press his plans with the country’s top planners.

As chairman of Las Vegas Sands, Adelson is accustomed to getting what he wants.  As America’s 3rd wealthiest citizen (nearly $27 billion, according to Forbes), he has the capacity to provide whatever incentives it takes.

Over the past decade, investors in Las Vegas and elsewhere in the world have eyed Vietnam as a Southeast Asian gambling hub, and some have spent tens of millions establishing beachheads in Saigon, Hanoi, Vung Tau and elsewhere.  Some envision Phu Quoc Island in the Gulf of Thailand as SE Asia’s version of Macau.

But Adelson, the world’s 15th richest person, may have more clout than any of his predecessors.  His net worth is nearly one-fifth of Vietnam’s GDP.  

Broadening his Sands proposal announced last year to spend $6 billion on resorts in Hanoi and HCM City, he told Vietnamese government leaders that his group wants to build a large-scale integrated resort in the northern province of Quang Ninh.  This could include a hotel, restaurants, conference center, exhibition hall, shopping malls, spas, sports arenas, theaters, a museum, and other entertainment facilities.

But even Adelson may face a challenge getting Vietnam’s government to allow its citizens to do what attracts many of them to the US:  play in Las Vegas style casinos.  That’s not consistent with communist Vietnam’s political philosophy.


The New American Invasion Into Vietnam

Twenty Thirteen is shaping up to be the year the USA overwhelms Vietnamese culture as McDonalds, Starbucks, and (probably) Harley Davidson join already established soft drink, pizza, and fried chicken conglomerates in an onslaught of American consumerism.

The invasion is just beginning.  Vietnamese consumers are wholeheartedly embracing US products, but this isn’t welcome news to those who think about the well-being of Vietnam’s environment and its nearly 100 million people.

Before Starbucks opened its first outlet in Saigon this spring, the makers of Coke, Pizza Hut, and Pepsi announced major expansion plans.  This summer McDonalds joined the crowd after years of speculation that its entry into Vietnam was not a matter of if but rather when and where; resentful speculation included the rumor that Hanoi’s immensely popular Bobby Chinn restaurant had to move and ultimately close because McDonald’s muscled the owner out of his prime real estate.

This fall US-based Harley Davidson is said to be recruiting staff for its first official showroom in Ho Chi Minh City after “unofficial’ dealers have been importing and selling the motorcycles for up to $40,000 apiece (including 100% import tax) for years.

Starbucks plans hundreds of cafes.  McDonalds can have as many as it wants because the company selected the prime minister’s son-in-law to run its Vietnam operations.  Harley Davidson is already popular in one of the world’s biggest two-wheel cultures even though the company doesn’t officially operate there.

The American companies are latecomers to the Vietnam market, and they will find enormous success there, as Kentucky Fried Chicken and Coca Cola have before them.

But skeptics will raise the question of just how good (or bad) the news is for Vietnam and its consumers.  Vietnamese health researchers already have linked the country’s rising incidence of childhood obesity to American soft drinks.  How good can American fast food be for a population accustomed to fresh produce, seafood and chicken soup made from chickens that were alive yesterday morning?  And what will be the impact of ear-shattering, bulky, macho, born-to-be-wild American motorcycles on a quiet culture that thrives on bicycles and modest motorbikes?

The last American invasion of the Vietnam countryside escalated exactly 50 years ago and did a lot of damage.  Will history judge the 2013 invasion as harshly?




Coca-Cola’s Ugly Americanism in Vietnam

Coca-Cola is facing a boycott in Vietnam in response to reports the American company hasn’t paid any taxes over the past decade of exploiting consumers there.

Vietnamese media say Coca-Cola’s financial reports show $120 million in revenue and $129 million in expenses for 2010, for a loss of $9 million.  Since the company began its Vietnamese operations a decade ago, a $180 million cumulative loss has been reported.  Therefore, no corporate tax has been due.

The Vietnamese public doesn’t believe it.  The perception is that the company has used transfer pricing to take losses while continuing to make heavy investments to exploit Vietnamese consumers.  Local newspaper reports inflamed public opinion, while Coca-Cola was announcing a $300 million expansion plan for Vietnam over three years.

In addition to claims Coca-Cola evaded taxes while gaining Vietnam’s largest share of the soft drink market, the company got in hot water with local authorities in Danang for trying to add 4,700 square meters of land even though it hasn’t used all the land that already had been allocated.

And health authorities in Vietnam aren’t happy about rising obesity among children that they say is partly explained by consumption of Coca-Cola’s products.

Coca-Cola’s public relations nightmare in Vietnam is a problem for US businesses in general.  American investors need to be supportive — not just exploitive — partners in Vietnam.  That’s what sets them apart from China and others in one of the world’s most dynamic frontier markets.

Borrowing the Vietnamese People’s Property

Starting this weekend, foreigners in Vietnam’s capital city can get 50-year certificates of land use rights and home ownership.  This is a significant development in a communist country where the land belongs to the people.

The Hanoi People’s Committee will not grant foreign ownership for farmland or public parks or gardens, and the ownership certificates ultimately expire.  Even so, it’s hard to imagine the regulatory structure being anything like it is today in fast-moving Vietnam a half century from now.

Economics appears to be a driver of the new policy.  Vietnam is experiencing a prolonged stagnation in real estate values.

Under current regulations, a foreigner is allowed to lease land on a long-term basis, but they cannot own houses; there are  427 exceptions countrywide, but very few foreign home-ownership permissions have been granted over the past five years.

In any case, opening home ownership to foreigners in Hanoi could be a turning point for Vietnam’s dismal real estate market.

Vietnam Is Not Ready for a Las Vegas Gamble

This spring was supposed to bring a watershed event to Vietnam’s tourism industry and its global economic aspirations:  Vietnam’s first Las Vegas style casino.   Instead, Las Vegas corporate pillar MGM is abandoning its contract to manage the Grand Ho Tram resort for Canadian investor Asian Coast Development.

top_site_international_businessThe $4 billion beachfront resort East of Saigon on the South China Sea had experienced a series of delays, cost overruns, and regulatory concerns.  But the heart of the issue may be a simple reality:  Vietnam isn’t ready for Las Vegas and the elements of western culture it represents.

Luck plays a significant role in Vietnamese culture.  Some people visit fortune-tellers before making decisions.  Children get “lucky money” in celebration of the new year.  Informal (illegal) lotteries and gambling parlors flourish in villages countrywide.  The government sponsors a lottery and permits small casinos in high end hotels.

But casino gambling on a grand scale is another matter; the Vietnamese government was so anxious about the Ho Tram casino that Vietnam had planned to allow gambling there only by foreigners, not Vietnamese citizens.

Sunday dinner in 2008 at a local bookie's house next Hanoi
A bookie tallied bets during a dinner I attended one Sunday in December 2008 in rural Northern Vietnam

Apparently, Vietnam’s discomfort translated into reluctance that discouraged MGM from participating in a losing business proposition.  Ho Tram partners faced a range of roadblocks that may have included off-the-books expenses that could have interested US regulators.

So last month MGM filed notice with the US Securities and Exchange Commission that it was exercising its right to cancel its contract.   Thus, MGM joined Malaysian casino operator Genting and Las Vegas Sands in getting cold feet dealing with Vietnam’s ambivalent bureaucracy.

Asian Coast Development says it will open the resort when it finds a replacement for MGM to manage 2,000 hospitality professionals and the gaming facilities, two 5-star hotels with 541 rooms, a golf course, nine restaurants and luxury retail outlets that comprise the $500 million first phase of the project.  Ultimately, the project calls for a 400-acre entertainment complex on a mile of seacoast to be developed over 10 years.

This will give the Vietnamese culture more time to adjust to the idea of the ultimate exercise of capitalism in their communist country.  But economically, it is a major setback as Vietnam competes with its neighbors for the Asia-Pacific’s lucrative resort-casino market.

Outing Vietnam’s First Billionaire

Forbes names Vingroup’s Pham Nhat Vuong as the first Vietnamese citizen on  its annual list of the world’s billionaires — three decades after communist Vietnam began free market reforms and 10 years after the Saigon stock exchnge opened.  Forbes calls Vuong’s success a “triumph of capitalism,” but Vietnamese media suggest less conspicuous Vietnamese business leaders may be richer than Vuong.

top_site_international_businessVuong ended 2012 holding just over $1 billion in stock; Forbes says he is worth $1.5 billion overall.

Government-owned Vietnamnet says Doan Nguyen Duc — whose company owns more than 100,000 acres of rubber trees, hydropower, real estate, and a football club, among other enterprises — was wealthier than Vuong two years ago before his holdings dropped in value.

And Vietnamnet points out Vietnam may have several other billionaires whose assets are hidden because their businesses aren’t publicly traded.   Among them is Dao Hong Tuyen, owner of many private companies and real estate projects said to be worth a total of $2 billion.

Vuong, 44, owns the majority of Vingroup, the real estate firm responsible for some of Vietnam’s most spectacular and elegant developments.

It may seem remarkable that the country whose civil war was won by communists a generation ago has now produced a billionaire.  But the real milestone may be that wealth in Vietnam has become sufficiently transparent that it is now possible, in some cases, to measure it.