FDI

Vietnam FDI opportunities and overview in 2021

Tra Mac

May 19, 2021

Vietnam is the third largest market in Southeast Asia and one of the fastest growing economies in the world. Low costs and regulations that encourage foreign investment are just some of the main factors that attract foreign entrepreneurs. In this article, we present you an overview of Vietnam FDI and FDI Opportunities in Vietnam 2021. 


Overview of Vietnam FDI in the 1st quarter, 2021

About Vietnam FDI, according to the data from the Foreign Investment Department, as of March 20, 2021, total foreign investment registered for new issuance, adjustment, capital contribution, share purchase of foreign investors reached 10.13 billion USD , an increase of 18.5% over the same period in 2020. This is a fairly strong increase, after the first two consecutive months of declining.

Of these, newly registered capital reached $ 7.2 billion, up 30.6% over the same period; adjusted capital reached 2.1 billion USD, up 97.4% over the same period. Meanwhile, the total value of investment through capital contribution and share purchase reached 908 million USD, down 58.5% over the same period.

However, in fact, according to the Foreign Investment Agency, the outbreak of COVID-19 resurfaces in many countries and in Vietnam also affects travel as well as new and expanded investment decisions.

Therefore, the number of new projects, capital adjustment as well as capital contribution and share purchase by foreign investors continued to decrease compared to the same period, but the decrease rate has improved. Specifically, the number of new investment projects decreased by 69.1%, increased investment decreased 31.8%, investment through capital contribution, share purchase decreased 70.9% over the same period.

The average size of newly registered projects and capital adjusted projects both increased sharply over the same period, the main reason for the newly registered capital increased by 30.6% and the adjusted capital increased by 97.4%.

In the first quarter of 2021, Vietnam granted new investment certificates and adjusted capital for quite a few large-scale projects.

The largest is the LNG Long An I and II Power Plant Project (Singapore), with a total registered capital of over 3.1 billion USD, in Long An. Next is the O Mon II Thermal Power Plant Project (Japan), with a total registered capital of over 1.31 billion USD, in Can Tho.

Besides, there is also LG Display Hai Phong project (Korea) adjusted to increase investment capital by 750 million USD; Project Radian tire manufacturing (China) in Tay Ninh, adjusted to increase investment capital by more than 312 million USD.

In particular, earlier this year, there was also the Fukang Technology Factory Project (Singapore), with registered investment capital of 293 million USD with the goal of manufacturing and processing tablets and laptops in Bac Giang. This is a project of great significance in attracting foreign investment in Vietnam.

A positive point in attracting foreign investment to Vietnam FDI in the first quarter of the year is that the disbursement capital is estimated at 4.1 billion USD, up 6.5% over the same period in 2020.

The more positive production – business situation after the influence of COVID-19, plus the appreciation of the potential of the Vietnamese market, has made foreign investors speed up the construction of factories in Vietnam. And so the disbursed capital has increased.

About Vietnam FDI, 17 fields were invested by foreign investors, in which the processing and manufacturing sector ranked first with a total investment capital of nearly 5 billion USD, accounting for 49.6% of the total registered investment capital. .

The field of electricity production and distribution ranked second with total investment capital of 3.9 billion USD, accounting for 38.9% of total registered investment capital. Following respectively are the fields of real estate business, professional activities in science and technology with a total registered capital of 600 million USD and over 167 million USD. According to partners, there were 56 countries and territories investing in Vietnam in the first three months of the year. Singapore leads with total investment capital of nearly 4.6 billion USD, accounting for nearly 45.6% of total investment capital in Vietnam; Japan ranked second with a total investment capital of nearly 2.1 billion USD, accounting for 20.8% of total investment capital.

It is worth mentioning, that the investment capital of Singapore and Japan is mainly in the form of new investment, accounting for 93.4% and 70.8% of the total registered capital of these two countries, respectively.

Meanwhile, South Korea ranked third with a total registered investment capital of nearly 1.2 billion USD, accounting for 11.8% of total investment capital. Followed by China, Hong Kong, the United States …

Data from the Foreign Investment Agency also showed that, thanks to the gradual recovery of production and business, the export turnover of the foreign-invested sector continued to increase in the first three months of the year.

Specifically, exports (including crude oil) were estimated at 58.59 billion USD, up 27.5% over the same period, accounting for 76.4% of export turnover. Export excluding crude oil was estimated at 58.21 billion USD, up 28% over the same period, accounting for 75.9% of the country’s export turnover.

In the opposite direction, the import of the foreign investment sector was estimated at 49.8 billion USD, up 30.3% over the same period and accounting for 66.8% of the country’s import turnover.

Generally, in the first three months of 2021, the export surplus of foreign investment sector was nearly 8.8 billion USD including crude oil and the trade surplus was nearly 8.4 billion USD excluding crude oil. The trade surplus in the foreign investment sector offset the trade deficit of nearly 6.7 billion USD of the domestic business sector, helping the country with a trade surplus of about 2.1 billion USD.


Opportunities for Vietnam FDI 2021 [*]

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 in the eyes of international investors.

Therefore, investors still consider Vietnam as an attractive 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 inflows 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.

Real estate

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 Vietnam FDI in industrial real estate:

  1. Existing investor trend to expand production facilities, expand initiators, associate investment and bring factories in Vietnam to participate in the global supply chain.
  2. Investment shifting trend “China + 1” or shifting investment from some countries to patients taking advantage of the advantages of safe destinations, skilled workers.
  3. 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

Retail

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 Vietnam FDI 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, 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.

[*]: 2021 FDI Opportunities in Vietnam


Types of industries and provinces that will be prioritized in the above economic zones

In the process of attracting investment, the Ministry of Planning and Investment found that there are a number of priority sectors emerging in accordance with the goals. The key manufacturing sectors, which have a large contribution to Vietnam’s export share, include electronics and components manufacturing; supporting industries in these industries; pharmaceutical manufacturing; medical equipment; digital technology, digital banking; processing industries (for agriculture products) and automobile. Another area is heavy industry: steel, oil and gas; renewable energy, electrochemical oil, and LNG. In addition to this, startups and innovation projects are huge by meeting a lot of investment funds willing to spend billions of dollars to invest in innovative startup projects. This morning, the MPI successfully organized the VN venture submit conference, the funds committed to support 800 million dollars to pour into outstanding ideas. The MPI will increasingly select ideas for investment, make investments to concretize into start-ups and be able to commercialize.

Some localities with good infrastructure conditions, favourable locations, and many industrial parks with competitive quality will have advantages in attracting investment. These are the two main regions, the Southeast Delta and the Red River Delta. Some localities have advantages such as Hanoi, HCM City, Dong Nai, Binh Duong, Vung Tau, Da Nang, Bac Ninh, Hai Phong, Hai Duong, Bac Giang, Hung Yen, Vinh Phuc, Ha Nam, Quang Nam.

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