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Vietnam A Compelling Growth Story

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

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  1. 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

  2. Vietnam BIDV - Vietnam Partners Investment Management

  3. Vietnam – The door is open. BIDV - Vietnam Partners Investment Management

  4. 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

  5. Contents Country Overview A Growing Economy Investment Landscape Investment Opportunities BIDV - Vietnam Partners Investment Management

  6. 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

  7. 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

  8. 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

  9. Country Overview BIDV - Vietnam Partners Investment Management

  10. Contents Country Overview A Growing Economy Investment Landscape Investment Opportunities BIDV - Vietnam Partners Investment Management

  11. A Growing Economy • Vietnam has made tremendous progress on wide-ranging platforms BIDV - Vietnam Partners Investment Management

  12. 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

  13. 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

  14. A Growing Economy Industrial Output 2002 - 2006 Source: General Statistics Office; Ministry of Industry Source: World Bank • Economic Performance BIDV - Vietnam Partners Investment Management

  15. A Growing Economy • 2008 might be another year of spectacular growth. BIDV - Vietnam Partners Investment Management

  16. Contents Country Overview A Growing Economy Investment Landscape Investment Opportunities BIDV - Vietnam Partners Investment Management

  17. 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

  18. 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

  19. 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

  20. Contents Country Overview A Growing Economy Investment Landscape Investment Opportunities BIDV - Vietnam Partners Investment Management

  21. 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

  22. Investment Opportunities Fastgrowing private sector Transportation Privatization of former SOEs Infrastructure BIDV - Vietnam Partners Investment Management

  23. 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

  24. Investment Opportunities • Private sector potential is significant and growing BIDV - Vietnam Partners Investment Management

  25. Thank You - Q&A BIDV - Vietnam Partners Investment Management

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