Trading Companies: Risky Business

Soon after Viet Nam became an official member of the WTO earlier this year, local insurance industry analysts watched with great interest as the Japanese Daiichi Life Insurance Company purchased a 100% interest in Bao Minh CMG Life.

After the purchase, Daiichi has announced its entry into the Vietnamese life insurance market and the replacement of the Bao Minh name with Daiichi.

The acquisition is considered to be the biggest deal in Vietnamese financial history. Soon after the purchase, Daiichi held a press conference announcing both its entry into the Vietnamese life insurance market and the replacement of the Bao Minh name with Daiichi. In a single stroke Bao Minh CMG was history.

But Vietnamese companies are not only being bought up by foreign interests, they are often being bought by other Vietnamese companies as well. Take, for example, the Phuong Nam Cement Company, recently acquired by the Tay Ninh - Tafico Joint Stock Cement Company for more than VND 400 billion.

Also in the news recently was the franchising of several Vietnamese companies such as Trung Nguyen Café and Pho 24. Franchises can be purchased both inside and outside the country.

Another surprise came when a Vietnamese company acquired the exclusive rights in Viet Nam to Hong Kong based GREE, a world-renowned air conditioner manufacturer. GREE’s Vietnamese leaders are very optimistic that the prestige of an international brand name will not only allow them to dominate the domestic market, but also place them in a good strategic position for export activities in the future - particularly now that Viet Nam is a member of the WTO

Recently, the buying and selling of companies in Viet Nam has become commonplace – one need only browse a website like www.muabandoanhnghiep.com.vn, to find a long list of Vietnamese companies for sale, however, most of them are private and it is very rare to come across the sale of state-owned interests.

Pho 24 (Photo:KK)

While the impact of the sale of one Vietnamese company by another on national interests or economic development is generally negligible, the potentially negative consequences from the sale of a Vietnamese business such as Bao Minh CMG to a foreign interest cannot be ignored. Although foreign takeovers of local enterprises are a common occurrence in the global market place and constitute a typical method of investment in developed countries, they could lead to the dominance of the Vietnamese market by foreigners in the future.

Mrs. Nguyen Thi Ngo, Deputy General Secretary of the Vietnamese Federation of Small and Medium Enterprises, said that Viet Nam is considered to have a great deal of potential by foreign investors, especially since becoming a member of the WTO. Of particular interest to the investors are companies that have already established a good reputation with consumers and have a well developed manufacturing infrastructure.

Therefore, besides developing concrete legal regulations with regard to the sale of one company to another, the Government also needs to draw up appropriate support policies for Vietnamese businesses so that they can remain as the main players in the economy of Viet Nam.

By Nguyen Thu Tuyet – Translated by Kim Khanh

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