Six years ago, Vietnam’s private equity sector was as hot as they come. Investors piled into one of the world’s great frontier states, a rapidly urbanizing nation of 90 million consumers all trying to get up the next rung on the ladder.
But that was 2007. Between then and now there has been a financial crisis and a European debt crisis. China accelerated; the western world slowed to a crawl. Vietnam suffered its own economic spasm. Inflation spiked from barely 5% in late 2009 to five times that level two years later. Economic growth slowed from nearly 7% in 2010 to 5% in 2012 and is tipped by the Asian Development Bank to top out at 5.2% this year.
And nonperforming loans continue to rise. In May 2013, State Bank of Vietnam governor Nguyen Van Binh warned that soured loans stood at around 10% of the total stock of lending (about $13 billion), rather than previous estimates of 6%. That number could yet rise further. "It’s not a pretty sight in Vietnam at all," mourns a Singapore-based fund manager with long-standing investments in the country.
Private equity in particular has been hammered.
