Warburg Pincus to grow Vietnam exposure

The firm, which has already invested in a shopping mall operator, sees the country as an “extension of its China strategy”, according to Jeffrey Perlman, responsible for the firm's investments in South-East Asia.

Vietnam continues to attract more attention from some of the world’s biggest private equity firms due to the strong performance of its retail market, desirable demographics and enhanced regulations easing foreign investment.

According to Jeffrey Perlman, who leads Warburg Pincus' investment activities in South-East Asia, Vietnam will be a key long-term focus for them in South-East Asia. Especially compelling narratives, he said, are rising domestic consumption driven by the country’s growing middle class and the “transformative shift” of China’s manufacturing base as costs rise, which is benefiting Vietnam.

“This is a region that we feel will be important for the firm going forward. We want it to be targeted so we want to be focused initially on Vietnam, which we see as an extension of our China strategy. What we see in markets like Vietnam – a sizeable population and increasing urbanisation – is similar to what we had seen in China five to 10 years ago. Our experience in the China market has become an actionable opportunity which will benefit our strategy in Vietnam,” Perlman said at the Credit Suisse Asian Investment Conference.

In 2013, the firm made one of the largest investments in the country when it bought a 20 percent stake in Vietnamese shopping mall operator Vincom Retail for $200 million, followed by an additional $100 million last year.

The investment, which will be used to fund the expansion of Vincom’s existing network of shopping malls, came from its Warburg Pincus Private Equity XI fund, a 2012-vintage vehicle that raised more than $11 billion. Other investments from the fund include Chinese car rental company CAR Inc and maternity-infant-children specialty retailer China Kidswant.

In addition to strong consumer demand, investors have also noted Vietnam’s strategic role in the ASEAN Economic Community and the Trans-Pacific Partnership (TPP) agreement among 12 member economies, including the US and Japan. The Vietnamese government estimates the TPP could boost total exports by $68 billion by 2025.

Another panellist, Le Thi Beng Tham, chairwoman of Vinamilk and HD Bank said that TPP brings opportunities and challenges, explaining that opening up will put pressure on Vietnamese enterprises to become more competitive.

Infrastructure, clean energy, finance, agriculture and nutrition, including food safety, could offer opportunities for foreign investors.

Lito Camacho, vice chairman of Asia-Pacific at Credit Suisse added: “One key attraction is the apparent determination of the incoming government to push ahead with reforms, particularly the renewal of state-owned enterprises and privatisation.”

After a record inflow of foreign capital in 2015 – $14.5 billion, up 17.4 percent from the year before – the government published a list of 17 sectors it is opening up to overseas investors, including real estate and services in tourism, transportation, construction and healthcare.