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Fund
banks on Mekong region's success
By James Borton
The new mantra of poverty reduction has dominated the Asian Development Bank's
annual meetings for the past several years. Under enormous pressure from
non-governmental organizations (NGOs) in the Asia-Pacific region, the ADB, a
multilateral development finance institution, has been placing a more "human
face" on its development programs, which sometimes has arrived at the expense
of the local villages, resulting in significant population relocation in the
name of liberalization and capacity building development.
The ADB is owned by 61 members, 44 from Asia and the Pacific and 17 from other
parts of the globe. The bank's Greater Mekong Subregion (GMS) Program has
already guided US$2 billion in investment over the past decade with nearly half
supplied from ADB, and the rest by governments, other donors, and private
sector investors. ADB and other donors, especially beleaguered Japan, recognize
that the Mekong region future rests with the emergence of the private sector.
 Chris
Freund, managing director of the Mekong Capital Fund, is seated in his modern
conference room on the 11th floor of Saigon Tower in the heart of busy and
congested Ho Chi Minh City, Vietnam. His new $18 million venture fund is making
investments in small and medium-sized private businesses scattered across
Vietnam, Laos, and Cambodia.
"Certainly, we are confident about identifying well-managed companies in the
region that need capital, and we have already made investments in several,"
says the youthful but experienced venture capitalist. Freund previously served
as a vice president and portfolio manger in Singapore at Templeton Asset
Management, the emerging-markets arm of one of the world's largest investment
management organizations.
The fund's lead investors include the ADB, the Nordic Development Bank, the
State Secretariat for Economic Affairs of Switzerland, the Finnish Fund for
Industrial Cooperation Ltd, and other private investors.
"This initiative will foster the ADB's strategic focus on economic integration,
as well as promote the role of the private sector in the Greater Mekong
Subregion," said Bruce Purdue, former director of the ADB's Private Sector
Operations Department.
Since the fund's establishment in April 2002, it has invested $1.6 million to
buy a 28.5 percent stake in the Tan Dai Hung Plastic Joint Stock Co in Ho Chi
Minh City, allowing the business to expand its production of plastic packaging.
Tai Dai Hung is now one of Vietnam's leading private enterprises in the
plastics industry, producing bags for fertilizer, rice, sugar, animal feed,
chemicals, and farm produce.
The firm's export revenues totaled $4.1 million in 2002 and are expected to
exceed $5 million this year.
Mekong Capital also invested $900,000 in the AA Construction & Architecture
Joint Stock Co, which specializes in interior decoration and in design and
production of high-quality wooden products for local sale and export to Japan
and other global markets.
"We are looking to invest as little as $100,000 and up to $2 million in each
venture, buying up to 30 percent of the companies' shares," explains Freund.
The initial feasibility study for the fund was undertaken by the Mekong Project
Development Facility (MPDF), a multi-donor program that assists in the
development and improvement of the environment for small and medium-sized
enterprises (SMEs).
International Finance Corp established the MPDF in 1996. It collaborates
closely with the governments in the region, business associations, NGOs, and
social and environment groups working in the SME sector.
The MPDF's general manager remains quite bullish about the increasing number of
talented entrepreneurs in the region. "We believe that many great entrepreneurs
with excellent growth potential are in this region who can benefit enormously
from the capital and advisory assistance provided by the fund," Dr Mario
Fischel asserted in MPDF's Hanoi offices.
One of the most promising signs for Vietnam was the implementation of the
Enterprise Law, largely championed by the tireless Pham Chi Lan, vice president
of Vietnam's Chamber of Commerce and Industry. With the passage of the law, the
country has witnessed the birth of more than 25,000 new business operations -
some of them now employing several thousand people - with a combined investment
of more than $1.46 billion.
The ADB is committed to providing resources to strengthen the development of
the private sector. This support includes numerous technical assistance
projects focusing on SMEs and is a major component of the ADB's poverty
reduction objectives. These technical assistance efforts support MPDF in
financing consulting and project activity programs in Cambodia, Laos, and
Vietnam.
"The market has achieved much openness in the last 10 years, and I see more
positive developments and resources available for new enterprise growth,"
remarks Nguyen Tran Bat, 57, a resident of Vietnam's capital, Hanoi, who runs a
successful investment consultancy, Invest Consult, and is a director of one of
Vietnam's investment funds.
(Copyright 2003 Asia Times Online Co, Ltd. All rights reserved. Please contact
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