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Policy changes for a perfect M&A environment

17:49 | 05/12/2020

VCN - In the current investment trend, investors will mainly choose the form of M&A. Recently, the Government and National Assembly of Vietnam have also put forwardmany policies to support and develop M&A activities of enterprises.

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Customs Newsspoke to Mr. Phan Duc Hieu, Deputy Director of the Central Institute for Economic Research, about this issue.

M&A activities in Vietnam still facemany difficulties and challenges. TheCovid-19 pandemichas caused M&A deals to decline. What do you think of this?

- The complicated development of the Covid-19 pandemicon a global scale has seriously affected investment and international trade activities, the value of M&A deals in Vietnam has decreased in 2020 compared to 2019. However, there are still many opportunities that Vietnam can seize to grow strongly.

In which, in terms of market factors, M&A has positive points. Specifically, before Covid-19 there appeared new "tastes" for M&A.This is reflected in the M&A deals in 2020.

For example, investors start to pay attention to the retail sectors.Becauseof theCovid-19 pandemic, it is shown that consumption demand foressential goods become important.Besides, withCovid-19,health and human issues are put on top, so the fields of health and education are a focus forinvesting,cooperating anddeveloping by investors. However,fields related to basic production activities, machinery and equipment still attract investment flows through M&A.

Mr. Nicolas Audier, President of Eurocham:

M&A deals in Vietnam will indirectly benefit when the free trade agreement between Vietnam and the European Union (EVFTA) is approved. However, the "taste" of European investors often focuses onspecific projects, so if there are no investor protection provisions, it is difficult to convince them to participate. First, competition law and enforcement must be similar to Europe. Secondly, a current problem is that when there is a dispute, investors go to where to handle it. And finally, the necessary procedures for investors to withdraw from Vietnam. Accordingly, I expect that investor protection regulations will spread to investment projects in transport infrastructure and logistics in the future, which are being delayed due to the effects of the pandemicand the trade warbetween major nations.

Mr. Nguyen The Nhien, Deputy General Director of Hung Thinh Land Company:

Now is the time to test the health of enterprises. At the same time, this is also the time to increase M&A activities in the real estate sector. Industrial and suburban real estate are on a strong trend to increase. The warming up of suburban real estate is due to changing consumer behavior. As for industrial real estate, with the pandemic, frozen foreign capital flow was an opportunity for domestic investors. For M&A in industrial real estate, transaction volume increases for domestic investors.

Accordingly, from the end of 2019, Hung Thinh Land Company has spent thousands of billions ofdong to implement M&A projects in BinhDinh, and currently we have more than 1,000 hectares in Lam Dong.

T.D (record)

According to experts, 2021 is forecasted to have many positive points to wait for the booming trend of M&A.Please tell us what changes of mechanisms and policies are in the effort to attract general investment of the Vietnamese Government?

- The Government and the National Assembly have revised many laws and policies in an effort to improve the investment environment in general.

In particular, a series of amended and supplemented laws related to business and investment activities will take effect in 2021, such as the amendedSecurities Law, the amendedEnterprise Law and the amended Investment Law.

These are three important laws that directly affect the business environment in general and M&A activities in particular.

Specifically, the revised Enterprise Law will improve the protection of buyers, the safety of buyers, the language of the law is to improve the level of protection for shareholders, investors who are buyers in M&A deals.

For example, the rights of shareholders and groups of shareholders, such as nominating to the Board of Directors, convening the General Meeting of Shareholders (AGM),according to the current regulations, must own 10% or more shares and continuously for six months.This regulation has prevented M&A activities,because as soon as they buy shares, it takes six months to restructure and improve the efficiency of the company.

These irrationalities will be abolished in the new law, which reduces the ownership rate provision to 5% and deregulates the six-month period.

With the revised InvestmentLaw, the Government commits to strictly comply with the promulgation of the list according to the principle of exclusion, industries that foreign investors are not allowedand restricted investment(clearly stipulate which restrictions, form, rights, ownership).

To support that, the Securities Law's Decree has clear provisions on foreign ownership limits.Although it is not new, it is much clearer, such as what is forbidden, what must be complied with in terms of international treaties if regulated under international treaties, what must comply withthe provisions of Vietnamif regulated under the provisions of Vietnam to invest cannot be done, according to the treaties will, what provisions of Vietnam are according to Vietnamese regulations.

In addition, the new Investment Law is also an opportunity for M&A activities in particular. There are major changes, namely that the new law adds a field of investment incentives, including the production of goods and services to join the value chain for industries; the education sector with the addition of university education; medical sector with the addition ofmedical equipment.

An important point is that the law will introduce a concept, temporarily called "special incentive package" for each type of project and each investor.This package has a number of notes such as a limitation in research and development, a large-scale industry and innovation that are expected to have a positive impact on Vietnam's M&A activities.

Besides the Government's support in terms of policies to create a favorable investment environment, which changes should the M&A activities of Vietnamese enterprises need to improve their competitiveness?

- The Government's policy is just support, and the core issue comes from the parties. Experts also said that for the perfect M&A environment, not only change this law, the other law but also related to the capacity of local authorities, as well as other specialized laws; issues of access to information, culture of Vietnamese investors, the cooperation of post-M&A investors, are the factors forthe success and failure of the M&A deals.Accordingly, for domestic enterprises, in order to participate, they need to improve their competitiveness, build a good governance framework, business method and strategy. And at that time, they will become an attractive source of goods for foreign investors.

M&A activities are often considered the playground of foreign enterprises. In your opinion, what are the opportunities for domestic enterprises in the future?

- Previously many people became worried and there were even proposals to ban M&A, forbid enterprises from selling themselves to foreign enterprises. The real story of the past 2-3 years has proven that an open, favorable investment environment, not a ban, will promote M&A fairness.

We see a new trend this year that domestic firms participate a lot in M&A activities in the country.The percentage of value increases a lot compared to 2019.There are Vietnamese M&A enterprises going abroad.

Thus, overcoming all worries, contrary to the previous arguments,now enterprises said that M&A creates a channel to penetrate the market, take advantage of the opportunities of the FTAs.At present, it is happening, but in the future, when FTAs ​​are implemented at a relatively full stage, it is predicted that the offshore M&A trend will be more popular.

Gradually, M&A is not only a playground for foreigners but also a channel for all enterprises to restructure, reorganize production and business activities and develop business markets for investors.

Thank you, Sir!

By Thu Diu / Binh Minh