VietNamNet Bridge – The rising wave of mergers and acquisitions (M&A) in Viet Nam is a good opportunity to promote the development of investment funds such as private equity and venture capital.

Venture investment is considered an additional channel to raise capital. - Photo tapchitaichinh

These investment funds are seen as effective channels to raise capital for companies.

The development history of private equity/venture capital in the US showed that the boom of venture investment was based on several factors such as innovation, use of technology, capital needs and the growth of M&A.

"Based on these conditions, Viet Nam has got enough factors to promote the establishment and development of investment funds," Nguyen Thanh Long, vice chairman of the State Securities Commission, told Thoi bao Ngan hang (Banking Times) newspaper.

Long said hundreds of State-owned enterprises would be equitised in the near future and the private sector was expanding rapidly that would offer attractive investment opportunities in many sectors such as energy, mining, industrial chemicals, technology and communication, financial services, biochemistry and health.

"The demand for capital to fund M&As and implement equitisation is huge, but only a certain proportion of this capital can be raised through the banking sector and the stock market," he said, noting that venture capital could provide such essential funds.

However, domestic companies often face difficulties in accessing such venture capital due to the lack of innovative business ideas, weak business and financial management skills which fail to attract venture investors.

The authority views venture investment as an additional channel to raise capital. However, due to the nature of risk involved, it is essential to provide more incentives to encourage venture funds to pour money into potential companies.

Long said the current procedures to establish member funds were rapid, but the law still lacked specific regulations on definition, policy orientation or preferential conditions for venture fund operation.

There are no domestic venture funds in Viet Nam now, but Long said the Ministry of Science and Technology was working on a plan to launch a pilot venture capital fund this year to build a Vietnamese "Silicon Valley" model. The fund will receive contributions from businesses, organisations and individuals, not from the State budget.

Source: VNS