After Covid- 19, Vietnam is considered to be a “rare”, “golden opportunity” for a “spectacular change” in attracting FDI capital. However, according to the experts, it depends on the field and also needs to be carefully selected. In this article we will provide you with a condensed brief about FDI opportunities in Vietnam post-Covid 19.
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Key FDI emerging trend in Vietnam 2021
Between 2010 and 2019 a total of 21732 FDI projects were recorded. These projects represent a total capital investment of USD 143,327 million, which is an average investment of USD 6.6 million per project.
Vietnam is becoming an attractive FDI investment with an increasing number of projects and capital. The largest number of projects was announced in 2019, with 4,028 projects that year. Average project size peaked in 2019 for both registered capital and implementation capital. However, there was a trend in the number of smaller deals (mainly < USD 6 million).
Due to the impact of the COVID-19 epidemic, the global inflows of FDI are expected to decline by 40% in 2020. Foreign investment into other countries in the world plummets. However, Vietnam’s attraction of foreign investment in the first 11 months of 2020 is still relatively positive, reaching $ 26.4 billion (down 16.9% over the same period in 2019). The realized capital was 17.2 billion USD, only down by 2.4% YoY. The world and regional countries declined stronger than Vietnam. In which, Singapore is the largest investor with 8.07 billion USD, followed by Korea, China, and Japan.
The newly registered capital decreased slightly by 7.6% over the same period, while the additional capital was 6.3 billion USD, still up 7.8%. These are positive signals, enterprises investing in Vietnam immediately disburse, expressing foreign investors’ confidence in Vietnam’s investment environment (political, economical and social stability, and containing the COVID-19 well).
Top sectors of Vietnam FDI inflow
Manufacturing and processing
Despite the effects of COVID-19 that caused FDI flows to decline by 30-40%, calculated by UNCTAD, FDI was 75% over the same period. This is better than many other countries and this shows the attractiveness of Vietnam market in the eyes of international investors.
Therefore, investors still see many business opportunities in Vietnam thanks to the following three factors:
– The disbursed capital decreased (decreased by 2%), but the decrease rate was improving.
– Adjusted capital increased by 10.6% over the same period, reaching $ 6.4 billion.
– The number of new projects, capital adjustment and the number of capital contribution and share purchases by foreign investors have decreased, but the level has gradually decreased.
Currently, foreign investors are still interested, trust and have investment needs, but due to the COVID influence, the travel of new investors and the expansion of foreign investment projects continue to be affected.
Vietnam is emerging as one of the top manufacturing destinations in Southeast Asia.
Ranked 33rd in the top 100 most valuable national brands in the world, up 9 times compared to 2019.
Nearly 300 enterprises from countries around the world have plans to expand investment. Most of those make new FDI inflow or are researching and seeking for investment in Vietnam. In which, there are more than 60 corporations and enterprises that have had initial steps in implementing new investment and expanding investment in Vietnam.
Finance – Banking
Nearly a year ago, the merger and acquisition market (M&A) of the finance and banking industry set a new record when a strategic investment deal appeared with a value of nearly 20,300 billion VND, equivalent to 875 million USD. Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV) privately issued 603.3 million shares to strategic shareholder KEB Hana Bank (Korea) at the offering price of 33,640 dong / share.
In fact, half a year later, on the eve of the General Meeting of Shareholders in June 2020, Aozora Bank increased its ownership ratio of Orient Commercial Joint Stock Bank (OCB) to 15%, equivalent to holding more than 131, 5 million shares.
In 2020, some more banks have shared their plans to find foreign strategic shareholders. Nam A Bank’s plan to raise capital from VND 5,000 billion to VND 7,000 billion approved at this year’s Annual General Meeting of Shareholders. This is expected to attract more capital from foreign investors.
Meanwhile, Saigon Commercial Joint Stock Bank (SCB) also plans to issue 500 million shares. According to the bank’s leader, SCB is in the process of negotiating with strategic partners to mobilize foreign capital.
On the stock market, banking stocks were among the fastest recovering groups after the March 2020 sell-off. This partly reflected the certain interest of financial investors in this sector. As for the investors in the industry, the banking sector of Vietnam is also more attractive in the current period in the case of Vietnam becoming a remarkable destination in the trend of capital movement.
In addition, with the Vietnam-EU Free Trade Agreement (EVFTA) coming into effect in early August 2020, a special provision has allowed European banks to raise the ceiling on investor ownership limits. Foreign investment from 30% to 49% for 2 Vietnamese banks, except for the group of 4 joint stock commercial banks where the State is holding a controlling share.
From June 2019 to September 2020, the real estate sector accounts for nearly 40% of the M&A market in Vietnam, according to MAF Research.
In the context of increasingly tight land funds, the goal of owning a land fund for a long-term strategy through the form of M&A is the preferred solution by real estate businesses with financial potential. Therefore, the real estate M&A market prospect is forecasted positively in the coming time, because Vietnam is considered to be the least affected among Southeast Asian countries.
The opportunity that Covid-19 brings to businesses with available financial resources and good governance capacity is not small, because they are facing the opportunity to buy other businesses at cheaper prices.
The $ 50 million deal between Danh Khoi Holdings and Sun Frontier is the latest M&A deal in the real estate industry recently recorded. According to the Vietnam M&A Forum Research Group (MAF Research), Danh Khoi Holdings acquired 100% of Sun Frontier shares (belonging to a famous Japanese real estate group – Sun Frontier Fudousan).
In addition to Danh Khoi Holdings’ acquisition of Sun Frontier Vietnam, the deal that Pacific Star Investment and Development Joint Stock Company spent 42 million USD to buy shares in Vinaconex – An Khanh is also a remarkable move, according to MAF Research .
Specifically, Vinaconex has transferred the entire 50% stake in An Khanh New Urban Development Joint Venture Company Limited (An Khanh JVC), the investor of the Splendora An Khanh Project, to Pacific Investment and Development Company. Star.
Compared to Ho Chi Minh City, the M&A deals in Hanoi are smaller in scale, but also quite active. For example, the deal that Pacific Star Investment and Development Joint Stock Company spent $ 42 million to buy back the entire 50% stake of Vinaconex in An Khanh New Urban Development Joint Venture Company (An Khanh JVC), the investor project Splendora An Khanh.
In addition to domestic investors, M&A activities also have the participation of many foreign investors such as Mitsubishi Group and Nomura Real Estate Co., Ltd. of Japan, who bought 80% of the shares in phase 2 of the Grand project. Park, District 9, HCMC. According to the plan, the whole project will be completed and completed and handed over in 2023.
Limited potential investors tend to cooperate with real estate companies, investment funds with large financial resources to sell part or all of the Project and this creates a huge demand for M&A.
Industrial real estate developers are pushing investments in Vietnam*
In the next 5-10 years, there are 3 investment trends in industrial real estate:
- Existing investor trend to expand production facilities, expand initiators, associate investment and bring factories in Vietnam to participate in the global supply chain.
- Investment shifting trend “China + 1” or shifting investment from some countries to patients taking advantage of the advantages of safe destinations, skilled workers.
- Real estate investors boosted investment in Vietnam under two forms: direct investment in joint venture to expand factories, investment in infrastructure systems. The second form is M&A in the field of industrial BDS, acquisition of strategically located land, industrial zones to form investment, and convert functions. -> This is a strong emerging wave in the coming time.
*Source: Viettonkin research team
The Ministry of Industry and Trade said that in 2010, the total average retail sales of consumer goods and services per capita nationwide was only 19.3 million VND / person, by 2019 it was 51.2 million VND. / person, contributing approximately 8% to the gross domestic product (GDP).
Therefore, the modern retail market in Vietnam has great potential for development due to its large population size, young population structure and average increase in household spending by 10.5% per year …
A recent report by a number of market research companies shows that Vietnam’s retail industry recently opened its doors to the appearance of some popular retail brands from abroad with many chain stores like Uniqlo., GG25 …
According to experts, Vietnam also has a stable political system, is on the rise and integrates with high economic openness and disease control, so it is considered as a bright spot for investment in ASEAN and Europe Asia is also an attractive destination for investment market shifts.
Therefore, to analysts, Vietnam is holding “golden opportunities” to prepare to wait for the wave of FDI and retail investment to be no exception before the coming investment wave.
With the forecast to be the most exciting market in the world, Vietnam’s retail market is attracting a wave of foreign investment (FDI), but also creates many challenges for domestic businesses.
The era of Japanese retailers
The leading Japanese retail group in Japan – AEON, on the afternoon of November 2, officially announced its plan to open AEON MALL Hai Phong in mid-December. This is the 6th AEON MALL of AEON in Vietnam. AEON MALL has planned to invest in 20 major shopping malls in Vietnam by 2025.
“We will accelerate the expansion of this AEON MaxValu supermarket chain as soon as possible, with about 100 supermarkets in Hanoi,” said Mr. Nakagawa Tetsuyuki. After a period of observing and researching the market, AEON has recognized that the Hanoi market is very potential but there are few modern supermarkets.
Vietnam’s retail market, with a size of 100 million people, is considered a lucrative “piece of cake”. That is why, as soon as Vietnam opened its retail market, a series of big names in this field landed in Vietnam, from Metro Cash & Carry, to Auchan, then BigC, Lotte …
UNIQLO, another Japanese name, also opened two consecutive stores in Hanoi. So from the beginning of the year until now, regardless of Covid-19, this famous Japanese fashion house has opened 3 stores in Hanoi, and is expected to continue to open more stores in Hanoi and Ho Chi Minh City. HCM within the next 3-5 years.
Meanwhile, in the middle of last October, the first store of the largest Japanese cosmetic and pharmaceutical chain Matsumoto Kiyoshi also opened its doors to welcome customers at Vincom Dong Khoi (HCMC). Matsumoto Kiyoshi Holdings was supposed to open the first store in Vietnam earlier, but it was postponed for 6 months because of Covid-19 translation.
At the end of July, the first experience store in Vietnam of this Japanese retail chain officially opened its doors at Parkson Le Thanh Ton, Ho Chi Minh City. Of course, Muji didn’t come to Vietnam just to open a single store.
Expected threats for FDI post Covid-19
Besides the advantages, there are also many difficulties that make investors also have considered when investing in Vietnam, as listed:
- Lack of quality human resources.
- The decline of foreign capital due to the impact of epidemics causes a lot of difficulties while the demand increases, increasing competition among countries in attracting foreign investment.
- Our national conditions are still limited to receive moving capital flows, such as lack of the quality of human resources. We can see that the infrastructure system has not met the requirements; The legal and policy system still has overlaps and shortcomings, causing difficulties in the implementation process.
- Administrative procedures in many fields and localities are still cumbersome, causing difficulties and problems, prolonging the time to complete procedures for investors.
- The supporting industry has not yet developed, has not yet met the requirements of investors, many supporting products are still imported from abroad, causing difficulties and increasing input costs for production and business activities.
- The capacity of domestic enterprises is still very limited. It is difficult to absorb shifted investment capital effectively. The linkage between domestic and foreign businesses is not timely and effective.
- The industrial real estate for industrial production as well as available infrastructure to meet the needs of investors has not been promptly met.