Singapore Notebook
International Herald Tribune
June 8, 1992
Michael Richardson 

Vietnam's Capital Drive Proves Disappointing

Vietnam's attempt to attract foreign capital for an ambitious program to return state industries to private hands started on a disappointing note with the failure of the first direct-investment country fund for Indochina.

Promoted by Crédit Lyonnais and known as the Vietnam Growth Fund, it was unveiled in November.

There was considerable skepticism among analysts at the time that it would be able to attract anywhere near the anticipated $75 million. Indeed, institutional investors in Europe and Asia were so wary that the fund was aborted.

"We did not reach the minimum subscription target of $20 million, so the venture has been called off," said Nicolas Carp, managing director of Crédit Lyonnais (Asia) Ltd., the Hong Kong-based merchant banking arm of the French group.

Although foreign businessmen see potential economic growth and profits in Vietnam, they are evidently deterred by the slow pace of market reform, the lack of a clear legal framework and operating environment, labyrinthine red tape and pervasive corruption.

A Singapore-based analyst who is a frequent visitor to Vietnam said that finding sound companies in which to invest would have been exceptionally hard work for managers of the Crédit Lyonnais fund.

"Many of the state-owned companies in Vietnam are bust and even for those that are not, there is a lack of credible financial information," the analyst said.

Mr. Carp said that a potential lack of liquidity was probably a deterrent to institutional investors, who, when they buy a share in a country fund, "normally want to be in a position to sell it very quickly."

A new study by Peregrine Securities said that although the Vietnamese economy has made striking progress in some areas, it was weighed down by "the leviathan" of continuing state subsidies.

These subsidies, mainly to keep government industries afloat, amount to at least 25 percent of the annual budget.

The Peregrine report estimates that at central government level, some 30 percent of the state sector runs at a loss while at provincial and district levels, the figure is around half.

With unemployment and underemployment rampant, the government is unlikely to make haste with its reform program. - Message on Logging When he addresses the Earth Summit in Brazil later this week, Mahathir bin Mohamad, the feisty prime minister of Malaysia, will tell Western nations they have no right to criticize developing countries for cutting forests. Malaysia has been under attack from environmental groups in the West who say that overlogging, particularly in the states of Sarawak and Sabah, should be countered by bans on the import of Malaysian forest products. Malaysia exported logs and sawn timber worth 7.1 billion ringgit ($2.8 billion) in 1991, and Mr. Mahathir is determined to protect the industry and the jobs. Malaysian officials said Mr. Mahathir would assure the Earth Summit that controls are being tightened over forest practices in the Malaysian states. He will pledge that Malaysia would keep at least half its land under permanent forest cover. According to official figures, some 70 percent of Malaysia is forested, 56 percent natural and 14 percent plantation. - UIC Game Plans Observers of the Singapore business scene keep a close eye on the fortunes of debt-laden United Industrial Corp. because it controls some of the best commercial property in the island-state and its largest shareholder is the Salim group, one of Indonesia's wealthiest and best-connected conglomerates. The Salim group, headed by Liem Sioe Liong, a close associate of President Suharto of Indonesia, owns 24.5 percent of UIC. This will fall to 22.2 percent by the end of the week, when a major new shareholder, Singapore's United Overseas Bank group, formally completes acquisition of a 9.96 percent stake in UIC through a private placement of shares that was announced last month. UOB is conservatively managed and cash-rich. The transaction, to cost 102 million Singapore dollars ($63 million), will help the UIC group cut its debt to around 1.1 billion dollars. Much of the borrowing was incurred when UIC mounted an expensive takeover of Singapore Land in 1990. After selling down its stake to reduce leverage, UIC retained just over 51 percent of Singapore Land, which owns a number of prime office blocks, hotels and shopping complexes in the central business district. Wee Cho Yaw, UOB's chairman and chief executive officer, is to become chairman of UIC. He has already indicated that further debt reduction is needed to restore market confidence in UIC. Since 1990, UIC property and other assets in Singapore, Japan and Thailand have been sold, raising a total of 631 million dollars. Next on UIC's sale list are likely to be its Le Meridien hotel on Thailand's Phuket island and two office blocks in Calgary, Canada. Some analysts said that UOB, which has its own property arm, would eventually buy the Salim group's stake in UIC to gain control of Singapore Land's real estate. - Money Problems at Astra The Astra group, Indonesia's second-largest conglomerate after the Salim empire, has family financial troubles. William Soeryadjaya, founder of the group, and members of his family control the privately owned Summa group of property and financial service companies as well as owning 76.4 percent of PT Astra International, a publicly listed firm with interests spanning the automotive industry, finance and agribusiness. Heavy debts at Summa are forcing the Soeryadjaya clan to consider selling a substantial part of its Astra shareholding to raise around $350 million to bail out the family business. Possible buyers include Toyota Motor Corp., the Kuwait Investment Office, Inchcape PLC of Britain, Bank Danamon and the Sinar Mas group of Indonesia, and Temsasek Holdings, an investment arm of the Singapore government. Toyota has a long commercial relationship with Astra, which assembles the vehicles in Indonesia.

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