Tourist real estate remains a favourite investment magnet in this
central city, attracting 25 foreign direct investment (FDI) projects
worth 1.8 billion USD.
Le Canh Duong, Deputy Director of the
city’s investment promotion centre, made this revelation at the Mergers
and Acquisitions (MA) Investment Opportunities Conference in Da
Nang last week, saying the 25 FDI projects in tourist real estate made
up 54 percent of total FDI capital in the city.
Duong further
revealed that the city attracted 305 FDI projects worth 3.37 billion
USD, of which 174, worth 2.19 billion USD, were in the service sector.
The
city has so far developed 16 tourist property projects consisting of
749 villas, of which 609 are for sale and 140 for lease.
“The
city has called for investment in service and hi-tech industries as it
envisions developing a hi-tech, environment and service city in 2020,”
Duong said.
“Some projects calling for investment in the service
sector include the Han Market, health screening centre and logistics
centre, as well as the support industries, commercial centre and
retirement village,” he added.
Jonathan Ooi, Pricewaterhouse
Coopers Vietnam Deputy Director, said investors were becoming more open
to making investments in Vietnam because of the political and economic
stability achieved in the past few years.
“The economy is
recovering quickly, with a stable GDP growth rate and inflation under
control. The Vietnamese Government has made efforts to improve the
banking system and privatise State-owned enterprises, and these are
expected to stimulate MA activities,” Ooi added.
He also
pointed out that domestic players needed to consider their MA
options such as logistics, retail and pharmacy, to meet the challenges
in an increasingly open market.
“As of January 2014, totally
foreign-invested enterprises (FIEs) are permitted to provide almost all
types of logistics services in Vietnam, including storage and warehouse
service, as well as freight transport agency service,” Ooi explained.
“The
Government also will remove all barriers to FIE retailers under its
agreement with the World Trade Organisation while FIEs are allowed to
set up operations, as well as import and export pharmaceutical products
in the Vietnamese market,” he added.
Ooi also raised the
challenges for MA in Vietnam in valuation, information preparation
synergies and post deal integration.
“Unrealistic valuation
leads to difficulty in reaching an agreement with potential investors,
as well as a lack of a justifiable business projection and pre-deal
preparations and arrangements to boost the selling price,” he observed.
“Poor
accounting records and weak tax compliance leads to a lack of investor
confidence and further fall in prices due to increased financial risks,”
Ooi revealed.
Matthew Powell, Savills Hanoi Director, noticed
that Da Nang’s total supply of hotel rooms in the first half of 2014
increased by 12 percent year-on-year while average occupancy reached 66
percent, a 13-percent year-on-year increase.
He said the city
was expecting the number of hotel rooms to increase in the future, with
31 of 45 projects expected to provide a collective capacity of 7,500
rooms.
Powell also observed that investors were now interested in MA real estate transactions in Da Nang.
“Investors
are expecting the resolution of land clearance and compensation issues,
full payment of land use fees, clear shareholder structure and reliable
domestic partners. They also eye operating assets in hotels and
resorts, hotel management and development of beachfront sea-view and
potential upside,” he added.
According to Commercial Real Estate
Service (CBRE) Vietnam, from 2011 to the first half of 2014, MA
property transactions, formerly rare, had increased, with 54
transactions worth 1.5 billion USD, of which 1 billion USD were in Ho
Chi Minh City and 362 million USD in Hanoi.
HCM City is still the leading market in number of transactions, with 55 percent, and value, with 67 percent.
Do
Van Su, head of the foreign investment division under the Ministry of
Planning and Investment, explained that the legal framework in Vietnam
was either redundant or deficient.
“The legal framework in
Vietnam is overlapping,” Su noted. “Four laws on investment, enterprise,
securities and competition, as well as a series of WTO regulations,
control MA.”
“The legal framework has yet to address
concerns on the integration of Vietnamese enterprises with foreign
businesses following MA transactions, as well as currency
conversions in the securities market,” Su said.
“Many questions
have yet to be answered regarding the selling and concession project
transaction related to assets, as well as the capital of a business
after MA,” he added.
Le Minh Phuc, VinaCapital Da Nang General Director, urged the city to dismantle barriers to MA transactions.
Phuc
said the time for MA transactions in real estate between domestic
investors and foreign buyers needed to be reduced from 12 months to four
or six months to boost such transactions.
“The legal framework,
regulations and procedure should be flexible and open to changes that
are suited to these transactions. They require clear regulatory
guidelines from the various departments of natural resources and
environment, tax and construction to cut application time procedures for
investors,” he added.
Park Hee Hong, Korean Daewon Cantavil
General Director, revealed that his company has waited two years to find
new joint venture partners.-VNA