Vietnam has long been highly appreciated for its safety, political and economic stability. The country has also become an emerging economy in Southeast Asia since a lot of improvements and achievements in diplomatic relations and integration policies. As a result, many foreign investors are interested in investing in the country, especially Singaporean investors and both countries have had business relations for a long time. This article provides you with business and FDI opportunities for Singaporean investors in Vietnam!
Vietnam and Singapore FDI Trends
It is no surprise to us that Vietnam has become an attractive investment destination for various sectors, from manufacturing, real estate, energy, retail, construction, even in the sectors of arts, tourism, and entertainment.
In addition, it’s strengthened when Vietnam is one of the few countries in the world that won the battle of facing the COVID-19, the country has successfully restarted production and business activities, and yet still maintains them until today. These achievements have helped Vietnam significantly improve its reputation in the eyes of foreign investors, especially for Singaporean investors.
Speaking of the global FDI, Southeast Asia continued to be the region’s growth engine last year, and FDI to the subregion has risen to a record level of $158 billion or 5% rose, and the high investment flows into Singapore, Indonesia, and Vietnam.
Vietnam experienced a 6% increase in capital investment from $28.8 billion in 2018 to $30.6 billion in 2019, moving from third to second place among the top 10 Asia-Pacific countries. Additionally, inflows to Vietnam rose marginally and reached an all-time high of $16 billion, with robust inflows into manufacturing.
Singapore’s FDI is also growing strong. In 2019, Singapore got the highest FDI inflow of US$92 billion in the last 10 years. Not only that, Singapore took the first place among the ASEAN countries in terms of FDI inflow.
Many foreign countries, such as Japan, the United States and European countries were mainly investing in Singapore in the financial and insurance services, wholesale and retail trade sectors. Moreover, the financial and insurance services sector remained as the top sector with US$927.9 billion or 53.4%.
However, all four markets including Singapore, China, Hong Kong, and Japan investments were hit hard by the pandemic, but Singapore still has the highest proportion 86% of investors. Thus, Singapore still has a place in the eyes of the foreign investors.
Vietnam FDI Opportunities for Singaporean Investors
Based on the FDI report, FDI markets have recorded 21 projects that were relocations from China, and the 52% were destined for Vietnam, 10% to Mexico, and the rest 5% to Thailand.
One of the FDI sectors that are in demand is base metals and materials supplying, because some countries may gain demand for resources that are used in low-carbon technology, including metals and materials which are needed for renewable energy systems, energy-efficient buildings, and new forms of transportation. Hence, Vietnam is an important producer and also has essential materials that could fulfill the increasing demand.
In addition, US-based AES Corporation, a diversified power generation, and utility company, is planning to invest $3.1bn to build a combined cycle gas turbine power plant and an LNG import terminal in Bihn Thuan province, Vietnam. The plan is expected to begin the operations in 2024.
Vietnam has promoted foreign investment in specific Sustainable Development Goals (SDG) sectors, also in September 2018, the country relaxed conditions on operations in inland waterway transportation, including the businesses which engaged in construction and maintenance of inland water ships.
There are more advantages of investing in Vietnam, one of them is the Vietnamese government gives incentives to both domestic and foreign investors. The granting of tax and financial incentives is based on various criteria, such as particular sectors, including education, healthcare, sport and culture, high tech, scientific R&D, environmental protection, renewable energy, agricultural, and aquatic products.
The business location matters for these criteria, such as qualifying economic and high tech zones, industrial zones, or under-developed areas. The other two criteria are the scale of your business, for instance, investment capital exceeding D6.000 billion to be dispersed within 3 years or less from the investment approval date, and the last is manufacturing criteria.
With so many benefits in investing in Vietnam, the Singaporean investors definitely have a lot of opportunities to expand their businesses, and gain more attention on particular sectors, and have been given financial incentives as well.
There are also some prominent and significant FDI projects in Vietnam, such as Thailand-based Banpu Pcl. acquired the El Wind Mui Dinh Wind Farm in the south-central province of Ninh Thuan. The project has a value of about $66 million and is subject to customary approvals and conditions which are expected to take place in the fourth quarter.
Another project is A KKR-Led Consortium, including Temasek has acquired a minority equity stake in Vinhomes JSC, for a total consideration of VND15.1 trillion (US$650 million). To strengthen the information, Vinhomes is the leading integrated real estate developer in Vietnam, such as developing, managing, and related services.
Due to the pandemic this year, Southeast Asia is experiencing an economic slowdown, including a major disruption of production and supply chains in many industries. According to The Economist (UK), the year of 2020 will be slightly different, and also there are very few emerging economies that have opportunities for growth and development.
As the developed economies recession is growing rapidly, but the gap between developing economies and developed economies will be likely narrow. Fortunately, there are some countries that have emerging economies, such as China, Egypt, and Vietnam.
Based on the CNBC article “Economic Prospects of Vietnam” the country has been acknowledged as one of the brightest spots in Asia. Vietnam is very successful in controlling the spread of the outbreak, and as a result, the country’s economy is growing significantly, even better than other regional economies.
These reasons strengthen Singaporean investors to keep investing and expand the businesses in Vietnam. Even with this pandemic situation, Vietnam can maintain its economic growth, and also the government hopes to reach its ambitious targets.