Customer relationship management in securities company the case of bao viet securities company

Third, the thesis will provide some lessons which could be applied for investing to Private Equity in Vietnam for investment managers, who are managing fund and considering to allocate a

VIETNAM NATIONAL UNIVERSITY, HANOI

SCHOOL OF BUSINESS

Nguyen Duc Hai

PRIVATE EQUITY INVESTMENT: FRAMEWORK

AND PROSPECT FOR VIETNAM

Major: Business Administration

Code: 60 34 05

MASTER OF BUSINESS ADMINISTRATION THESIS

Hanoi – 2008

ACKNOWLEDGEMENTS

During my study, I have received many helps from my supervisors, my family,

my colleagues and my classmate

Firstly, I would like to express my sincerely thanks to Mr Nguyen Hai Ha, Mekong Capital’ ex-investment manager, and my boss now, for his suggestions and supports I also would like to thank to other colleagues at Vietnam Equity Holding fund for their advices and contributions to my thesis

To my supervisors, I would like to give my deeply thanks to Mr Ha Nguyen for his time to instruct me and give me valuable suggestions I also would like to offer my special thanks to Dr Nguyen Van Dinh for his encouragement to complete the thesis I also would like to thank Ms Nguyen Hong Ha, Ms Nguyen Thu Trang and others HSB faculty members for their helps and supports

Finally, I would like to send my heartfelt thanks to my family members, my classmates for their supports and encouragements

ABSTRACT

PRIVATE EQUITY FUND: FRAMEWORK AND PROSPECT FOR VIETNAM

Nguyen Duc Hai

MBA Candidate, 2005 – 2007 School of Business Vietnam National University, Hanoi

Supervisor: Nguyen Van Dinh, Assoc.Prof.,PhD

Ha Nguyen, MBA

My thesis aims to answer the question: how Private Equity Fund invests and to provide some frameworks & guidelines for who are interesting in this investment vehicle

First, the author illustrates the Private Equity industry, its structure, its researched framework and its activities in emerging countries

Second, the thesis will study and research the fact of Private Equity industry in Vietnam The author also chooses Mekong Capital as a snapshot to know what a typical private equity fund in Vietnam does and then withdraw some operational experiences from its experts

Third, the thesis will provide some lessons which could be applied for investing

to Private Equity in Vietnam for investment managers, who are managing fund and considering to allocate a part of fund assets to Private Equity, investors who are considering to invest to private equity fund

TÓM T ẮT

QUỸ ĐẦU TƯ TƯ NHẤN: CẤU TRÚC KHUNG VÀ TRIỂN VỌNG CHO THỊ

TRƯỜNG VIỆT NAM

Nguy ễn Đức Hải

Khoa Quản trị kinh doanh – Đại học Quốc gia Hà nội

Ng ười hướng dẫn: PGS.TS Nguy ễn Văn Định

ThS Hà Nguyên

Tháng 10 năm 2008, 70 trang

Luận văn này nhằm giải đáp cho câu hỏi: quỹ đầu tư tư nhân đầu tư như thế nào

và cung cấp một vài khung và một số chỉ dẫn cho những ai quan tâm tới loại hình đầu tư này

Đầu tiên, tác giả mô tả minh họa về ngành đầu tư tư nhân, cấu trúc, các nghiên

cứu khung và các hoạt động của nó ở các thị trường mới nổi

Sau đó, bài viết sẽ tiến hành nghiên cứu thực tế về ngành quản lý đầu tư tư nhân

ở Việt nam Người viết cũng chọn Mekong capital làm một bức tranh cụ thể để nghiên cứu và rút ra thêm các bài học kinh nghiệm về quản lý quỹ đầu tư tư nhân

ở Việt nam

Cuối cùng, bài viết sẽ liệt kê một số bài học có thể ứng dụng cho loại hình đầu tư

tư nhân ở Việt nam cho các nhà quản lý đầu tư, những người đang quản lý các

quỹ đầu tư và đang có ý định đầu tư vào loại hình đầu tư tư nhân và những nhà đầu tư, những người đang muốn đầu tư vào các quỹ đầu tư tư nhân

TABLE OF CONTENTS

ACKNOWLEDGEMENTS i 

ABSTRACT ii 

TÓM TẮT iii 

LIST OFABBREVIATIONS vi 

LIST OF TABLES vii 

LIST OF FIGURES viii 

INTRODUCTION 1 

1.  The problems 1 

2.  Objectives and Aims 1 

3.  Research questions 1 

4.  Scope of work 2 

5.  Data sources 2 

6.  Methods 2 

7.  Significance 3 

8.  Limitation 3 

9.  Expected results 3 

10.  Outline 3 

CHAPTER 1 – LITERATURE REVIEW 5 

1.1  The concept of private equity 5 

1.2  Type of Private Equity 6 

1.2.1  Venture Capital 7 

1.2.2  Buyout 7 

1.3  Investing Structure 9 

1.4  Size ranking 11 

1.5  Private Equity Performance 12 

1.5.1  J-curve 12 

1.5.2  Expected return 12 

1.5.3  Real IRR of Private Equity 13 

1.6  Private Equity in emerging market 15 

1.6.1  Private equity in investment pools 15 

1.6.2  Emerging market 17 

CHAPTER 2 –PRIVATE EQUITY IN VIETNAM 23 

2.1  Vietnam Investment Context 23 

2.1.1  Robust growth rate 23 

2.1.2  Bright prospective 24 

2.1.3  Young and grow labor force 25 

2.2  Private Equity in Vietnam 26 

2.2.1  Investment fund industry 26 

2.2.2  Private equity market snapshot 30 

2.2.3  Mekong Capital 33 

CHAPTER 3 –LESSONS FOR PRIVATE EQUITY INVESTMENT IN VIETNAM 47 

3.1 Lessons from natural characteristic of private equity investment 47 

3.2 Lessons for investors who are considering allocate his assets to private equity funds 48 

3.3 Lesson for fund managers who are considering allocate his fund capital to private equity 51 

BIBLIOGRAPHY 56 

APPENDIX 58 

LIST OF ABBREVIATIONS

Association was established in 1983 and is based in

Brussels EVCA represents the European private equity sector and promotes the asset class both within Europe and throughout the world

EMPEA is a broad-based membership organization founded

in 2004 to focus on the emerging private equity markets of Africa, Asia, Central and Eastern Europe, Russia, Latin America, the Middle East, and Russia EMPEA is comprised primarily of private equity fund managers, but also includes institutional investors, service providers and others with an interest in the asset class

LIST OF TABLES

Table 1-1 Beta, Standard deviation and Expected return 12

Table 1-2 Growth in Fund Raised 2005 - 2007 17

Table 1-3 Distribution of Fund sizes for Funds with final closes in 2007 18

Table 2-1 Mekong's typical investee companies 39

Table 4-1 Investment Fund results 61

LIST OF FIGURES

Figure 1.1 Venture Investment Stages 7

Figure 1.2 An Overview of alternative investment 9

Figure 1.3 Principal means of investing in Private Equity 9

Figure 1.4 The J-curve 12

Figure 1.5 Private Equity performance 14

Figure 1.6 Performance of upper and lower quartile 15

Figure 1.7 Total investable Capital market- December, 2006 16

Figure 1.8 Emerging markets Private Equity Fundraising Totals, 2003-2007 17

Figure 1.9 Stage of funds with final closes in 2007 19

Figure 1.10 Sector focus among funds with closes in 2007 20

Figure 1.11 Distribution of EM PE Fundraising by Region, 2003 - 2007 ($US mn) 21

Figure 1.12 Emerging markets private equity fundraising totals by region, 2003 - 2007 ($US mn) 21

Figure 1.13 Fundraising by country 22

Figure 2.1 The real GDP growth in 2006 23

Figure 2.2 Growth rate compare 24

Figure 2.3 GDP & inflation rate 25

Figure 2.4 Population growth 25

Figure 2.5 Vietnam's Demographic structure (% total population) 26

Figure 2.6 Fundraising in Vietnam 28

Figure 2.7 Fund type & strategy 28

Figure 2.8 Private equity fundraising in Vietnam 31

Figure 2.9 Mekong Fundraising, 2002 - 2007 33 Figure 2.10 Mekong enterprise fund performance, 2002 - 1H2008 36 Figure 2.11 Mekong Enterprise Fund, % capital allocation stage 37

INTRODUCTION

1 The problems

Private Equity is a broad and complex asset class within the Alternative Investments Its market is structured with specialized Private Equity funds The investments in Private Equity are still fresh and attractive investment tool

in Vietnam but are strongly developing in emerging market like China, Thailand, and Indonesia etc The recent development in Vietnam stock market lead Private Equity Investment (PEI) is on the demand of many investors Therefore in that context, the question of how Private Equity invests need be answered

This thesis aim to study how to invest in Private Equity and outline some principals of PEI for investor

2 Objectives and Aims

The objectives of this thesis is to study

• The basic concept of Private Equity Investment

• The fact of private equity investment in emerging market and Vietnam

• Opportunity and principal guidelines to invest in PEI for investors

With these above objectives, this thesis aims at giving a basic theoretical foundation for investors who are now considering in Private Equity Investment and then study the fact of operation of PEI in emerging market and Vietnam market

3 Research questions

The complete list of research questions is as follows:

• What are definitions, types, common features of Private Equity?

• What are steps in Private Equity Investment?

• How did PEI perform?

• Describe the PEI industry and give a case study?

• What are withdrew lessons for fund managers and investors?

5 Data sources

For the theoretical part, data sources are textbooks, articles from internet As for the fact, the data sources are mainly from some PEI associations’ reports For the case Mekong capital, the figure and lesson are withdrawn from management interview

6 Methods

The thesis uses the empirical method, case study in the study process It also use interview as a qualitative investigation

Choice of interviewees: The choice of interviewees was a rigid process and

very important since if the interviewee does not hold the right knowledge the entire thesis might end up useless The author chooses some investment

managers who are experience in private equity investment industry for interviewing

Interview structure: The two longer interviews were conducted in a qualitative manner, but with somewhat specific questions and make sure that every topic of interest was treated the interviewer followed a manual with the key subjects

The other limit is from case study method This method cannot cover all the theoretical issues of Private Equity Investment Thus, later this case, this thesis only studies the overall performance of PEI

CHAPTER 1 – LITERATURE REVIEW

CHAPTER 2 –PRIVATE EQUITY

CHAPTER 3 – LESSONS FOR PRIVATE EQUITY INVESTMENT IN VIETNAM

1 CHAPTER 1 – LITERATURE REVIEW

We start this paper by looking at the Private Equity asset class First, we give

a definition, type and investing structure in Private Equity Then, we look at some research result of its performance Finally, we will see how it impact in emerging market

1.1 The concept of private equity

Private equity is a small part of the investment world, but is growing strongly After a sharp decline in capital committed following the bursting of the telecommunications and technology bubble, private equity has seen an increase in capital commitments in recent periods The definition of private equity is as follows:1

• A form of financing that typically entails entrepreneurial funding, business expansion, business acquisitions, balance sheet restructuring

or the privatizing of a public company

• Conducted generally outside the public securities markets

• Encompasses a profit participation by the general partner

• Often comes in the form of a limited partnership

The definition of private equity illustrates that the asset class is very different than marketable securities Due to this fact, there are certain risks and considerations that need to be evaluated before an investment is made, and on

an on-going basis after an allocation has been implemented

- Illiquidity – Commitments to private market investments are usually in

the form of limited partnerships, with terms of 10 or more years There       

1 Source: VentureXpert definition

are no markets for these partnership interests and they cannot be liquidated or easily transferred This is a true long-term commitment

- Volatility is Understated – Because most assets are valued at cost

until a measurable event occurs, private capital investments appear to

be more stable in price than they actually are In addition, management fees and some losses are recognized early This gives rise to the “J curve effect.”

- Results Dependent on Management – The ultimate level of returns

received by investors is highly dependent on the skill of the funds manager and their access to good investment partnerships

fund-of Time Commitment – The amount of time Committees, Staff and

Consultants must spend in monitoring private capital investments is significantly greater than with other asset classes Cost and complexity multiply over time

- Information Flows – Reports and performance data are available on

only a quarterly basis and are usually lagged by a minimum of 60 days Returns are calculated on an IRR basis and there are no passive benchmarks against which you can compare results

- Cash Flows – Are complex to manage and capital calls often have

short notification periods and must be fulfilled on a timely basis

1.2 Type of Private Equity

There are two types of Private Equity: Venture Capital and Buyout

1.2.1 Venture Capital

Venture represents investment in unquoted companies that are expected to go

public This is what we mean by Private Equity in general We have 4 subcategories in the Venture market:

Figure 1.1 Venture Investment Stages

Venture companies lack tangible assets that can be used as collateral for loan and thus their access to debt financing is very limited Investments in Private Equity are staged, so that the investor keeps the option to abandon the project

at each milestone and limits his risks

1.2.2 Buyout

Buyout represents investment that puts in public companies or their divisions

which may want to go private A Buyout is, for instance, the purchase of shares of public companies by an external investor with the aim of taking a

controlling interest in that firm Buyout firms generally use a combination of

their own funds and debt to pay for takeover

- In a Leveraged Buyout, the acquirer takes out loans or bonds in the

target’s name in order to get better financing conditions from the lenders and uses the cash flow of the acquired company to pay them back It then seeks to improve performance by cutting expenses and usually sells the target company, often through initial public offering, within five years approximately

- Management Buyouts follow the same goal, where a part of the

managers of company raise funds to take control of it

The difference between these two sectors of Private Equity is that Venture capital is invested to take a minor interest, while Buyout is to buy the firm or

to take control of it Buyouts are less risky because the company is mature, its

stock is publicly traded and also because it has a historical performance Also, the publicly traded stock makes exit strategies easier The term “exit” is the means by which a Private Equity investor is able to realize its investment in a company -by an initial public offering, a trade sale, selling to another Private Equity firm or a company buy-back Private Equity is a particular asset class

in the category of Alternative Investments, as shown in this Figure below The name is “Alternative Investments” as opposed to “Traditional Investments” which refer to stocks and bonds

Figure 1.2 An Overview of alternative investment

1.3 Investing Structure

There are three ways of investing in Private Equity as shown in Figure 1.3

Principal means of investing in Private Equity An investor can:

1 Directly invest in private companies

2 Invest in a Private Equity fund who will then choose in which companies to invest in and how much

3 Invest in a fund of funds who will then invest in Private Equity funds

Figure 1.3 Principal means of investing in Private Equity

Private Equity funds take in general the form of Limited Partnerships The investment manager of a Limited Partnership is called the General Partner or Venture Capitalist, whereas the members of the Limited Partnership are the

Limited Partners The General Partner's main tasks are to conduct due diligence, to structure financial contracts, to monitor investments, to provide resources for portfolio firms and to build in exit strategies for investors Private Equity funds can specialize themselves by industry, geography, stage

of financing or size of companies invested

In such a governance structure, there is a moral hazard problem which results from the asymmetric information between the Limited Partners and the manager of the fund The manager's compensation should be set up so as to give him the right incentive The General Partner has a fixed salary around 1% of the committed capital plus a share of the fund's performance which is generally 20% and is called the carried interest A Private Equity fund charges

in general a fee between 0.75% and 1.25%

When selecting an investment, the manager faces an adverse selection problem since he doesn't know which firms are performing well and which are not So, his ability to select the right investment will be crucial for the fund's performance One way to lower the asymmetry of information in the Private Equity market is the due diligence made by each firm who demands financing

The funds of funds, instead of investing directly in companies, invest in other Private Equity funds This enables the investor to have a wide exposure on the sector and, thus, offers more diversification with cost effectiveness A fund of funds may also be attractive to an individual, because some Private Equity funds may be closed to them Due to its large investment size, a fund of funds

is a preferred source of financing for Private Equity funds, since they do not have to deal with a large number of small investors

A fund of funds charges a management fee between 0.75% and 1.25% p.a over the Private Equity fund usual fee For an investor, the trade-off is between investing in a fund of funds and doing his own Private Equity allocation Here, the key variable for the decision is the size of the investment

The direct investment strategy is not advisable for non-professional investors

As we said before, there is a strong asymmetry in information and thus, careful study of each company is needed for a sound investment For an individual investor desiring to invest in Private Equity to diversify its portfolio for example, we would recommend him to invest in a fund of funds

1.5 Private Equity Performance

1.5.1 J-curve

The investment in Private Equity is not done at once like for a classic stock The investor has generally a negative cash-flow during the first years of the investment and then starts to get his return This is illustrated in Figure 1.4 The J-curve

Figure 1.4 The J-curve

1.5.2 Expected return

An independent research of Ennisknupp showed that the expected return of

Private Equity is excess all other investment types but following by the highest beta and standard deviation

Table 1-1 Beta, Standard deviation and Expected return

Asset class  Beta with 

respect to  world market 

expected  arithmetic  return 

standard  deviation

expected  compounded/ 

Geometric  return 

Additionally, to account for the expected return compensation from investments on private markets, the arithmetic expected return for private equity is adjusted upward from 10.7% (based on the Global CAPM) to 13.7% Consequently, the compounded/geometric return for private equity would increase from 6.2% to 9.2% The 3% represents common industry expectation for the additional return provided by private equity investments over public equity

1.5.3 Real IRR of Private Equity

The generally adopted measure is the Internal Rate of Return (IRR) based on the cash inflows and outflows and the final net asset value, although we know that this measure is not relevant in some cases For this measure to work properly, the exact timing of the investments has to be known Obtaining this data is a difficult task, since the general sources like Venture Economics or the EVCA provide them only at an aggregate level

Figure 1.5 Private Equity performance

[Source: Ludovic Phalippou and Maurizio Zollo, 2005 - The Performance of Private

Equity Funds, page 11]

In Figure 1.5 Private Equity performance, we see the recent returns of Private Equity and the global impact of the Internet bubble which decreased the 3 year All Private Equity IRR to -2.3 % and 5 year to only 1.9% The returns are particularly low, especially for the Early Stage which is the riskier category

As we will see in the following, Private Equity is a long term investment, not only because a fund is created for 10 years on average but also because excess return is obtained only after 10 years This is why, when we look at Private Equity returns, we generally consider the 10-year return, which is 9.8% in our case

The choice of top quartile fund managers is particularly important in Private Equity The spread observed between good and bad managers is significantly higher in Private Equity than in quoted equity or bonds There is a 15% difference in returns from the lower to upper quartile, whereas this spread is about 1% for bond fund managers and 3% for public equities Moreover, a top

quartile fund manager tends to keep having the best returns As we can see in Figure 1.6 Performance of upper and lower quartile, access to top partnerships is critical

Figure 1.6 Performance of upper and lower quartile

[Source: Ludovic Phalippou and Maurizio Zollo, 2005 - The Performance of Private

Equity Funds, page 15]

We see in Figure 1.6 Performance of upper and lower quartile that the lower quartile had returns lower than the US T-Bill Thus, when building a portfolio

of Private Equity, not only should we consider the weights of our allocation but also the choice of best fund managers

1.6 Private Equity in emerging market

1.6.1 Private equity in investment pools

The Private Equity is a small asset class: Private equity constitutes less than

1% of the opportunity set The graph below shows what portion of the investable universe private equity, and other asset classes, represents

Figure 1.7 Total investable Capital market- December, 2006  

[Source: Ennisknupp, updated January 2008 - ENNISKNUPP capital markets modeling

assumption, page 2]

As we see in Figure 1.7 Total investable Capital market, Private Equity, named as Private Capital, represents only 0.8% of the total world investable market It is the lowest market with a total capitalization of $827 billion This

is because Private Equity is a temporary capital for young firms If the company is successful and achieves growth, then it goes public Moreover, every investor looks for a way to exit to gain a return on his investment

The Private Equity Industry has grown dramatically in recent years: as more

and more investors are entering the asset class and those already investing have continued to increase their allocations

The latest figures indicate that in excess of $600 million was raised over the course of 2008 making it another record year for the industry However, these bumper figures do not indicate that private equity fundraising has become an easier prospect; if anything the opposite is the case

1.6.2 Emerging market

Fundraising issue:

The dramatic growth of fundraising for private equity in emerging markets continued unabated in 2007 Two hundred and four private equity funds focused on emerging markets raised US$59.2 billion in capital commitments This figure represents a 78% increase over the US$33.2 billion raised by 162 funds in 2006, and a 17-fold increase over the US$3.5 billion raised in 2003

Figure 1.8 Emerging markets Private Equity Fundraising Totals,

2003-2007

[Source: EMPE, 2007 - Emerging market Private Equity 2007 Fundraising Review,

Emerging market Private Equity Association, Page 6]

Table 1-2 Growth in Fund Raised 2005 - 2007

New entrants included both US and European private equity managers turning

to Asia and Central and Eastern Europe, and homegrown funds in the Middle East and Latin America Fund sizes grew more than 50%, with funds holding

final closes in 2007 raising on average US$426 million versus US$272 million in 2006 Among closed funds, 54% held final closes at US$250 million or under, compared with 65% in 2006

Fund raising size

As in 2006, the majority of funds that achieved final closes in 2007 raised US$250 million or less, however this portion of the EM PE landscape decreased from 65% of funds in 2006 to only 54% in 2007 In 2007, 19 funds

in the market raised US$ 1 billion or more Of these 19 funds, 17 achieved final closes during 2007

Table 1-3 Distribution of Fund sizes for Funds with final closes in 2007

Size of funds with final 

closes

2007,  No.Funds

$US m  Total  Capital  raised  (EOY2007)

Cummulated  probability  (%) 

[Source: EMPE, 2007 - Emerging market Private Equity 2007 Fundraising Review,

Emerging market Private Equity Association, Page 5]

Of the 204 funds that held closes in 2007, 133 achieved final closes These funds exceeded their collective US$49 billion fundraising target by 18% or approximately US$8 billion The 71 funds that held first closes collectively raised US$10 billion as of December 31, 2007, against a total stated target of US$15.1 billion Of these 71 funds, 27 were focused on Asia with a collective fundraising goal of US$4.4 billion Eight Middle East funds had a collective goal of US$4.2 billion

Stage of funds

Half of the 204 funds with closes in 2007 targeted mainly growth opportunities, compared to only 25% of funds in 2006 Twenty-five percent were venture capital funds, 21% focused on buyouts, while the remaining 7% were mezzanine funds Funds targeting Asia were mostly focused on growth and venture, while CEE/Russia had a heavier focus on buyouts This is consistent with fund focus trends in 2006, where 53% of CEE funds were buyout-focused, and 70% of Asian funds were growth or venture

Figure 1.9 Stage of funds with final closes in 2007

[Source: EMPE, 2007 - Emerging market Private Equity 2007 Fundraising Review,

Emerging market Private Equity Association, Page 10]

Sector focus

As in 2006, the majority of funds did not have an explicit primary sector preference Of funds in the market, 58% were generalist in strategy (representing 66% of capital raised) Another 17% were focused on technology, while eight funds, or 4% of the universe and 6% of the capital, and were primarily investing in the infrastructure sector

Figure 1.10 Sector focus among funds with closes in 2007

value  ($US m)

[Source: EMPE, 2007 - Emerging market Private Equity 2007 Fundraising Review,

Emerging market Private Equity Association, Page 10]

Fund raising by region

Emerging Asia remained the premier destination for capital commitments, with US$28.7 billion in 2007, or roughly 49% of total fresh capital raised, and 59% of the US$117 billion raised since 2003 Capital raised by Asia-focused funds represented an increase of 48% over 2006’s US$19.4 billion raised

Figure 1.11 Distribution of EM PE Fundraising by Region, 2003 - 2007

($US mn)

Figure 1.12 Emerging markets private equity fundraising totals by

region, 2003 - 2007 ($US mn)

[Source: EMPE, 2007 - Emerging market Private Equity 2007 Fundraising Review,

Emerging market Private Equity Association, Page 11]

As in previous years, Asia drew the greatest share of fresh capital raised in

2007 Within Asia, fundraising activity was concentrated on regional funds,

raising US$19.4 billion, followed by funds dedicated to investments in India

or China, collectively raising US$8.4 billion The continued surge in Asian fundraising was fueled in large part by the growing sizes of funds focused on Asia In 2006, 93 funds raised US$19.4 billion, 98 funds raised US$28.7 billion while in 2007,—adifference per fund of approximately US$85 million Ten of the funds in the market in 2007 raised US$1 billion or more as of December 2007

Figure 1.13 Fundraising by country

[Source: EMPE, 2007 - Emerging market Private Equity 2007 Fundraising Review,

Emerging market Private Equity Association, Page 12]

2 CHAPTER 2 –PRIVATE EQUITY IN VIETNAM

In this part, the paper will look at Vietnam Investment context and then take a research tour for current investment funds in Vietnam

2.1 Vietnam Investment Context

Vietnam now is considering as an emerging tiger of Asia Just one year after joining WTO, Vietnam rapidly became attractive destination of all dynamic investors This result comes along by some fundamental factors in macro economics view:

2.1.1 Robust growth rate

Vietnam's economic growth rate has in the recent past been second only to China in Asia, averaging 7.4% for the period 2000-2006 compared to China's 9.5% and India's 6.7%

Figure 2.1 The real GDP growth in 2006

[Source: Deutsche Bank, Investment Report 2007 - 'Understanding Vietnam, page 3]

On the other hand, its development level is more like India's with nominal GDP per capita for 2006 estimated at USD 715, close to India's USD 765 and

less than half of China's nearly USD 2,000 In comparison, Vietnam is as poor

as India, but is growing at almost the same speed as China (India’s growth has accelerated, though)

Figure 2.2 Growth rate compare

(real GDP growth, CAGR 2000 – 2006, %)

[Source: Deutsche Bank, Investment Report 2007 - 'Understanding Vietnam, page 3]

2.1.2 Bright prospective

According to Deutsche Bank Research's Formel-G model, which forecasts

real GDP growth for more than 30 industrial countries and emerging markets until 2020, Vietnam is likely to grow at about the same speed as India and China in the next one and a half decades − at an estimated 5.7% p.a Hence, in

2020, Vietnam’s GDP per capita will have reached approximately the same level as China’s today

Figure 2.3 GDP & inflation rate

[Source: gso.gov.vn]

2.1.3 Young and grow labor force

Vietnam population growth is the third ranking compare to other neighbors

Figure 2.4 Population growth

[Source: Global Economics Paper No 165 - Vietnam: The Next Asian Tiger In the Making,

page 5] With very young population, 65% population aged ranges from 15 – 64