Vietnam’s growing property market

An artist impression of Yen So Park integrated development in Hanoi, Vietnam. Inset: Chow Chee Wah.

There is a growing number of foreign developers scouting around for opportunities in Vietnam.

While there are some success stories, there are also those that have been caught by the intricacies of doing business in the country.

Investors worry about the “quite under-developed” legal system and regulatory framework, and have to be vigilant in the face of disputes.

Other concerns include lack of transparency in business licensing and the regulatory environment in general. Being an agro-based and export-led economy, Vietnam has undergone significant transformation in recent years largely due to external factors.

Despite potential concerns of overheating and rising inflation, the country has, on the whole, managed to stay on the growth course.

Gamuda Land Sdn Bhd managing director Chow Chee Wah says Vietnam, which joined the World Trade Organisation (WTO) in 2007, is still undergoing changes to attract more foreign direct investments (FDIs).

“Many things are still new to them and their policies are not as mature compared with countries like Malaysia. The Vietnamese government is still trying to streamline its policies to complement the FDIs that are flooding in,” he tells StarBizWeek.

Chow feels that this is why the Vietnamese authorities are still cautious when dealing with foreign investors.

Gamuda’s 800-acre Yen So Park project in Hanoi involves the development of a sewage treatment plant, transformation of an existing park into an international theme park, and integrated commercial and residential developments.

It has an estimated gross development value (GDV) of RM10bil over a 10-year period. The residential component is targeted for launch in the second quarter of this year.

A WCT Land Bhd spokesman says the biggest challenge in Vietnam is land resettlement issues.

WCT, which received the investment certificate for its mixed commercial development project two years ago, hopes to finalise the land resettlement issue by the year-end.

“It usually takes between two and three years,” he says, adding that the matter has also been delayed due to the global financial crisis, which has affected Vietnam’s economy.

“It has been a good learning curve for us and we believe we have achieved quite a lot in the past two years,” he says.

The WCT project comprises office towers, serviced apartments and a hotel, with an estimated GDV of RM1bil.

The WCT spokesman says although Vietnam still does not have a housing development Act, developers still have to adhere to stringent regulations.

Permits have to be granted by various committees, local area governments, city governments and the central government before a project can proceed.

SP Setia Bhd president and chief executive officer Tan Sri Liew Kee Sin acknowledges that the learning curve is steep with language being one of the main challenges.

“SP Setia’s expectations on quality is also another hurdle as local contractors and suppliers are not able to meet the high standards set. This is due to limited exposure.

“These issues take time to overcome. It took us about two years of groundwork, understanding the culture and business environment before we finally entered into a joint venture. We have been fortunate that our partner is the country’s top state-owned conglomerate which is the land owner of EcoLakes,” he says.

Mobilising its most experienced staff to share knowledge and expertise with the local workforce has worked out well for SP Setia, as the company has reduced the number of seconded Malaysian staff to nine from 17 since venturing into Vietnam in mid-2007.

Gamuda’s Chow points out that Malaysian developers, when venturing into Vietnam, should conduct sufficient research on the country’s cultural habits, business etiquette, and design and layout preferences.

“It is also important to identify local representatives and target companies for contact. They will know the subtleties of the local culture. The partner must have a good track record and understand the various challenges of doing business in the country.

“There should also be clarity in their financial dealings. Law firms in Vietnam will be able to help conduct due diligence to determine if a potential partner has good reputation,” he says.

By The Star