Three giant investors' race in foreign investment inflow
One of the top Korean groups in the energy, telecommunications, hi-tech components, logistics, and services sector, SK Group has just invested $470 million in Masan group—one of the three largest private companies in Vietnam in terms of market capitalisation. With this decision, SK will hold 9.5 per cent of Masan’s shares and become its biggest foreign investor.
SK is only one of the latest Republic of Korea (ROK) firms investing in Vietnam. According to The Foreign Investment Agency (FIA) under the Ministry of Planning and Investment, most large Korean companies have already invested in Vietnam, including Samsung, LG, Lotte, and CJ. Besides, there are also Shinhanbank, Wooribank, and Nonghyup. By the end of August 2018, Korean investors had 7,161 projects with the accumulated registered capital of $61 billion.
In the first nine months, Japan registered $7.09 billion, taking the top spot, $4.18 billion of which was smart city investment by the joint venture of Vietnam’s BRG Group and Japan’s Sumitomo Corporation Asia & Oceania Group.
However, going by accumulated figures, Japan is now down to the second spot, giving up the crown after a long reign. At present, Japan is investing in 3,899 projects with a total of $55.77 billion registered investment in Vietnam.
Most Japanese companies have their own offices in Vietnam, like Honda, Toyota, Panasonic, Canon, and Aeon, Mizuho, and recently, Unicharm.
Meanwhile, at the end of September 2018, Singapore was at a stable third place for years with 2,127 projects and a total registered investment of $46.04 billion. Previously, for a short month in 2017, Singapore used to be the largest foreign investor in Vietnam with a series of famous names like Semb Corp., Mapletree, Keppel Land, and Banyan Tree. However, Singapore is quite far behind the No.1 and No.2.
The runner up at the fourth place, Taiwan with the registered investment of $30.98 billion. This means that investors from other countries are far behind the top three.
Looking forward to investment from the US and Europe
Figures from FIA show that at the end of September 2018 Asia accounted for over 70 per cent of FDI in Vietnam. Meanwhile, investment from Europe and the US is far behind.
The US, the biggest economy and the biggest investor in the world, has only 880 projects in Vietnam with the total registered capital of $8.87 billion. This figure excludes projects like Intel, Coca-Cola, Procter & Gamble, and ConocoPhillips which invest in Vietnam through subsidiaries in other market like the British Virgin Island, Singapore, and Hong Kong. However, $9 billion is still a modest figure. In 2017, the US’ outbound investments reached $342 billion, 22 per cent more than last year, but only $868 million of this went to Vietnam.
Meanwhile, outbound investment from the European Union last year reached $334 billion, which is down 41 per cent compared to 2016 but is still substantial. Nevertheless, Vietnam only received a very small investment from the EU. According to figures from the FIA, 24 out of the 28 EU countries have investments in Vietnam, but the Netherlands, England, France, Luxembourg, and Germany account for 84.3 per cent of total EU investment.
The Ministry of Planning and Investment admits that the economic and trade relations between Vietnam and the EU have been developing smoothly but EU investments in Vietnam are still limited, especially in hi-tech and modern services from top EU countries such as Germany, France, and Italy.
Preparing to summarise 30 years of FDI, Phan Huu Thang, former director of the FIA thinks that it is necessary to clarify the reason behind the modest FDI from the US and the EU. Experts from the International Finance Corporation (IFC) while researching the strategy on FDI attraction orientations in 2018-2030 stressed that attracting investors from the US and the EU is of vital importance.
The FIA also affirmed that the US and the EU are still promising investors and need to have suitable investment incentives available for each business and each country to meet the high requirements of the world's leading multinational corporations on the protection of intellectual property rights and combating corruption.
“Attracting investment from the US and the EU mainly depends on responding to investors' demand for openness, transparency, and predictability through Vietnam's policies,” FIA noted.