Vietnam property draws foreign cash

By Dominic Whiting, Asia property correspondent

HO CHI MINH CITY (Reuters) - Vietnam is starting to draw global property investors, but many are wary about finding the right local partners as cold-war-era firms with no building experience turn themselves overnight into developers.

Foreign-run fund managers in Vietnam are talking up the huge demand for resorts, offices and homes in an export-oriented economy that was boosted by entry into the World Trade Organisation in January.

Gross Domestic Product grew at an average 7.5 percent a year 2001-2005 and last year expanded by 8.2 percent.

The spiel is working. VinaCapital closed a $407 million property fund this month, turning away around $200 million (103 million pounds) of subscriptions, and IndoChina Capital raised $205 million last year. Now Vietnam's biggest fund manager, Dragon Capital, is following the same path.

"The demand is huge, the difficult part is commiting the capital," said Neil Thurston, associate director at Dragon Capital. "In a developing market, investors have to be creative," he said, adding that he was looking at the leisure and service sectors.

But investors new to Vietnam should do serious homework on local partners, which have turned to the property sector from activities as diverse as vehicle imports and soft drinks. Typically, Vietnamese firms have contributed land, while the foreign partner delivers the capital.

"Failures have come when wealthy local entities with land ignored advice and put up buildings in bad locations or with design defects," Thurston said.

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