HANOI- Vietnamese policymakers should not be much concerned about mergers and acquisitions (M&A) which are just part of corporate life, legal experts said.
“The emergence of M&A has raised the question if it leads to take-over of local companies or monopoly,” said Pham Manh Dung, general director of the Department of Legislation under the Ministry of Planning and Investment (MPI).
Speaking at on Thursday’s M&A Vietnam 2009 conference, Dung assured local lawmakers that so far, M&A in Vietnam had been done for the sake of healthy growth. “The government should look at M&A as a normal sign of progress.”
In recent years, with the enactment of a body of laws to better govern enterprises and investments, M&A had gathered force here.
Most cases have taken place in the financial sector, which is still in its nascent stage of development and thus has enormous growth potential for investors.
Foreign financial companies have resorted to M&A of local ones as a way to enter the market which is yet to be fully open to them.
According to Pricewaterhouse-Coopers, the number of M&A cases jumped from 18 in 2005 with a total value of US$61 million to 93 cases in 2007, valued at over US$1.7 billion.
The economic crisis caused a decline in 2008, but the figures were still high with 38 cases worth US$346 million.
Major deals included Daiichi buying 100% of life insurance company Bao Minh CMG, AZN acquiring stakes of Sacombank and securities firm SSI, HSBC investing in Techcombank, and Dragon Capital in Vinamilk.
But critics say the legal framework has yet to address the complexities of these activities, and still poses many barriers to foreign investors.
“To put it bluntly, the biggest concern for foreign investors is that they aren’t allowed to buy as much as they want to,” said Dominic Scriven, managing director of Dragon Capital.
Under Vietnamese laws, foreigners cannot own more than 30 % of a Vietnamese bank, or 49 % of a non-bank public company. The laws do not set a limit on foreign ownership of non-public companies in most cases.
But Tran Anh Duc, head of law firm Vilaf Hong Duc, said that in practice, a transfer of 99% of non-public companies might be questioned by authorities, and a transfer of 100% of these companies was still subjected to complicated approval procedures.
Duc said onerous procedures were actually a great concern for foreign investors. M&A registration that was processed in weeks elsewhere could take months here in the country.
In a survey presented at the conference by Grant Thornton, cumbersome processes and red tape outdid the legal system as the number one hurdle to investments in Vietnam.
Lower on the list were infrastructure, corruption and currency controls. (SaiGon Times)
