Tuesday, April 20, 2010

Investing in Vietnam: Interview- Mr. David Blackhall, Deputy Managing Director, Real Estate, VinaCapital.

With a bevy of development projects in the works, and a strong year-end performance projected, Vietnam is carving out a spot in the emerging property market. A revitalized stock marke; rebounding global economy; and strides in the nation's infrastructure are contributing to the favorable investment outlook.
To learn more about the real estate market in Vietnam and the opportunities available for foreign investors, I caught up with Mr. David Blackhall, deputy Managing Director, Real Estate, VinaCapital.
VinaCapital is one of the largest property investors and developers in Vietnam. VinaCapital Real Estate (VCRE) is the real estate advisory and development service for VinaCapital Group, which manages three closed-end funds that trade on the AIM Market of the London Stock Exchange. These funds are among the largest vehicles for investment in Vietnam, and include VinaLand Limited (VNL), with net assets of USD694 million. VNL invests in residential, retail, office, mixed use and hospitality assets across Vietnam. VinaCapital will launch a new non-listed Vietnam Real Estate LP/GP structured Fund in Q2 2010 that will `capitalize on this exciting market.
The company is responsible for managing and developing over 40 of Vietnam’s top real estate assets. In addition to a team of over 70 of Vietnam’s most qualified real estate professionals, VCRE also works closely with VinaProjects, a newly established construction and project management joint venture between VinaCapital and inProjects from Hong Kong. Together, VCRE and VinaProjects will work to deliver truly international standard real estate projects. Work is currently underway on several major residential and retail projects in Danang, and the Dai Phuoc Lotus township project in Dong Nai, near Ho Chi Minh City.
Vietnam’s urban landscape is being transformed as the country undergoes unprecedented development that has seen an average annual growth rate of over 7 percent for the past decade. An important part of Vietnam’s development is the complete transformation of its urban and industrial landscape. As incomes rise, Vietnam’s growing middle class is demanding new, well-planned residential areas, and modern retail space and leisure facilities.
In the current market, the residential sector is gaining the most headlines, as middle-class consumers are showing high demand for new housing, and a second-home market has emerged for higher-end residential resort properties. The mortgage market is developing quickly, which will facilitate investment in projects focused on first home, low- and mid-range consumers (previously an area with very low margins). Demand for low- and medium-end projects in 2010 is expected to increase fourfold against 2008.
In Vietnam’s largest city, Ho Chi Minh City, CB Richard Ellis’ fourth quarter 2009 research update states that 60,000 housing units are expected to be completed by 2012, which remains far below expected demand of more than 110,000 units. By 2020, CB Richard Ellis estimates almost half a million new homes will be needed. In this environment, where demand is far outreaching supply, developers looking to bring affordable, good-quality modern housing to the market are increasing as there is great reward potential at hand.
The retail market also is an area seeing significant activity, as there is a very low supply base of modern shopping space in major cities — less than 800,000 square meters in Hanoi and Ho Chi Minh City. Vietnam rated sixth on A.T. Kearney’s 2009 list of the world’s top emerging market retail markets. There are many new developments on the drawing board, but large foreign hypermarket and supermarket chains are still actively pursuing opportunities. Sites with the right blend of size, location and cost are very hard to secure, and this has kept the pace of foreign investment in this sector relatively slow to date.
The hospitality sector was inevitably hit by the global economic slowdown. Hotel occupancy and average daily rates dropped significantly in 2009 as tourist travel to Vietnam was down 20 percent for the year. The market is not expected to fully recover in 2010; however, the long-term potential remains strong with tourist visits expected to top 5 million by 2013. Domestic travel also is increasing rapidly as more budget airlines enter the market. Currently, three- to four star business hotels in city centers are attracting the most attention from international investors.
The sector hardest hit by recent macroeconomic trends is the office market, where a significant increase in supply coincided with the global economic crisis. Vacancy across all office grades was 14.5 percent in Ho Chi Minh City at the end of 2009. Class A office buildings in Ho Chi Minh City have seen rents fall from more than US$60 per square meter in early 2008 to around US$35 per square meter currently. With a further 350,000 square meters of supply expected during 2010, rents are expected to soften an additional 10 percent to 15 percent.
For investors new to Vietnam, recognizing some of the basics is important. There are no REITs in Vietnam, and listed real estate equities are either small-cap or, if larger, are often part of diversified conglomerates that may not interest overseas institutional real estate investors. There are, however, numerous other routes to invest in Vietnam’s real estate sector. Overseas investors are usually best served by partnering with an experienced real estate developer that has in-depth exposure to Vietnam. A team with a strong network, local expertise and a deep understanding of the legal terrain is the key to overcoming Vietnam’s complex regulatory environment.
Land leases from the state or other organizations holding a land-use right can be issued to foreign investors for a maximum of 50 to 70 years (Decree 84/ND-CP) for real estate projects. Generally, a land lease is obtained through a native Vietnamese partner that contributes its right to use the land as part of its capital contribution to the joint venture. However, it also is the case that 100 percent foreign-owned entities can obtain investment licenses and land use rights for real estate development. More recently, effective from 1 January, foreigners can own a majority stake in a Vietnamese real estate joint stock company.
Despite the merits of Vietnam’s developing real estate market, there are many issues to consider. Investors should look carefully at the sector exposures and overall context of any investment platform. Investors also must pay great attention to the ability of the investment team to promptly and effectively manage the many issues specific to investing in real estate in Vietnam.
For instance, Vietnam’s legal system and regulatory framework are fast developing, but weak by international standards. There is a resulting lack of transparency in many areas, such as land resettlement, which can take two to three years depending on the scale and location of the development. Urban infrastructure in Vietnam is poor, and the pace of development is slow, so real estate developers should carefully consider the impact of transport and other types of infrastructure on their projects.
Vietnam’s government during the past two years has demonstrated an admirable ability to manage the economy and maintain a path of stable economic growth. The extreme speculation of 2006 and 2007 has been removed from the real estate market and is not likely to return in the foreseeable future. Going forward, investors and developers who are able to recognize issues early on and successfully negotiate Vietnam’s challenges will be rewarded by a market eager for a complete transformation of its built environment.
Vietnam has strong property rental and income rates compared to many neighboring countries. While investors arriving in Asia predominantly look first to China for opportunities, Vietnam offers compelling overall fundamentals with less risk of a bubble emerging as substantial growth and development of the urban environment continues. Vietnam offers a broad resource base, favorable demographics, low labor costs and a central location in Asia. Two-thirds of the population is below the age of 35, with a population growth rate of 3.4 percent per year. Vietnam has 26 million urban dwellers in 2010 (30 percent of the total population of 86 million by 2020, the country will need to provide housing, retail, entertainment amenities and office and for up to 45 million urban dwellers (45 percent of the estimated total population of 100 million).
Vietnam’s cities are low-rise and overcrowded, with outdated electricity, water and drainage services the norm. In short, a complete transformation of Vietnam’s urban environment remains in its early stages. Market yields for property owners are high compared to regional countries. The challenge for foreign investors is to navigate a complex terrain of business networks and legal frameworks that remain opaque.

Thursday, April 8, 2010

Praise a Korean's English skills and get media space

Is this news? Sometimes I wonder....
Two foreign bank chiefs said in unison that new Bank of Korea (BOK) Governor Kim Choong-soo’s English is excellent, with one of them saying that Kim would prove to be competent enough to preside over the central bankers’ meeting as part of the G-20 meeting to be hosted by Korea.
Their assessments came during a get-together Wednesday at the BOK.
The former ambassador to the Organization for Economic Cooperation and Development (OECD) greeted bank CEOs. They included Larry Klane of Korea Exchange Bank (KEB) and Richard Hill of Standard Chartered First Bank.
The head of the BOK exchanged greetings with the two. Klane said in Korean, "I am the CEO of KEB.’’ Kim responded in English and had no problem in making himself understood.
The chief executive of SC First Bank praised Kim’s English skills. "He was perfect. His English is top class. I’m sure he is the right person to lead G-20 meetings,’’ Hill told The Korea Times.
"As I know, his English is quite advanced. He was a Korean ambassador to the OECD, so I am sure that he can chair international meetings in English,’’ Jung Hee-sik, director general of the press office at the BOK, said.
Kim was selected to succeed Lee Seong-tae as the BOK governor starting in April and some said that his selection was partially based on his international expertise ahead of the G-20 summit to be held in Korea in November.
Just goes to show how obsessed the Koreans are with English!

Wednesday, April 7, 2010

Ajumma to the rescue

The much maligned Ajumma- hot-tempered, married woman sporting loose floral print pants and tight perms- has her uses.
As this blogger so aptly puts it:
Ajumma can apply to any Korean woman over 30. By the mid-fifties, because they've "paid their dues," I guess, some behave a little less politely than most other Koreans, and care a little less about the general courtesies that are either the grease that keeps the wheels of society turning, or the B-S- that keeps people from acting out who they really are.
... ajumma is the one most likely to shove you as she dives for a seat on the subway; she's the one most likely to be rude to you in a restaurant, to touch your white skin, poke your curly hair, grab your love handles (out of sheer curiousity -- look at how big those cheese-smelling foreigners get!), comment that you're writing in your journal with the wrong hand (I'm a lefty), and you'll sometimes do what they say, however unnecessary, just so they'll leave you alone. This is the impression many foreigners get of Korean ajummas. Some of us carry a downright bitterness and resentment of the mature set.
Although the butt of jokes among the expat community here, the government has different ideas.
As this news article  notes, the government is hoping that the friendly faces of thousands of middle-aged women will improve the public response to this year’s national census.
Statistics Korea will concentrate on hiring women in their 30s and 40s to conduct the door-to-door surveys in November, the state-run agency announced yesterday. The preference for ajumma, as middle-aged women are known in Korea, reflects the belief that people feel more comfortable opening their doors to female strangers rather than males, while middle-aged women tend to be more persuasive in dealing with households that are reluctant to respond.
The national census, which takes place every five years, will be conducted from Nov. 1 to 15, with 95,000 census takers asking households simple questions about their living conditions.
Hiring for the survey agents will begin in August, with each paid 42,000 won ($37.39) a day. They will be required to wear state-issued identification tags.
“It has become harder to make people open their doors and respond because of so many crimes happening out there,” said one Statistics Korea official.
In previous years, census takers had typically been young college students and housewives hoping to earn extra money by taking temporary work.
But officials believe that the ajumma will prove more effective.
“The college students give up as soon as a household refuses to let them in. But these ajumma are more persistent, trying harder to persuade a homeowner to open the door and answer questions,” said the Statistics Korea official.
“People feel that ajumma are more approachable and so they tend to be more willing to answer their questions.”

Monday, April 5, 2010

Red Star Operating System

More news on North Korea’s N. Korea's 'Red Star' operating system.
North Korea's new "Red Star" computer operating system is mainly designed to control the flow of information on the Internet tapped by users, a review by a state-run think tank said.
The Science and Technology Policy Institute (STEPI) said a detailed technical analysis of Red Star version 1.1 shows it is a Linux-based operating system with low-end options similar to those found in products that reached the market in the early 2000s.
It added that while it is similar to the ubiquitous Windows OS, emphasis has been placed on meeting security and other local requirements. There is only one Korean-language version of the system and due to the limited number of compatible applications there is little likelihood of its being put to wider use.
STEPI's study is the first technical analysis of the Red Star OS that was first developed in 2002 by the North's Korea Computer Center. Prior to its introduction, Pyongyang used the English versions of Microsoft Windows.
A Russian student in Pyongyang recently purchased an updated version of the Red Star and introduced it on his blog, though this was not a specialized review.
"The review was needed to get an estimate of how far North Korea's OS software has progressed," the STEPI report said. It added that Red Star represents North Korea's attempt to overcome the country's isolation in the computer field while at the same time coping with security concerns.
The communist country maintains close tabs on information and data into and out of the country and does not permit its people to freely surf the World Wide Web, with particular emphasis on prohibiting visits to South Korean Internet sites.
The institute under the education and science ministry said there is almost no political content and that developers have continuously updated the Red Star OS over the years.
One bright side to this is that atleast the country is not shackled to Microsoft like South Korea.
"In short, South Korea is a sad example of a Microsoft monoculture where the course of history and the lack of anti-monopoly oversight have created a nation where every computer user is a Windows user and banking or ecommerce or any secure transaction on the Internet with South Korean entities must be done with Internet Explorer on a Windows OS."

Friday, April 2, 2010

Was Obama Checking Out This Girl's Butt?