Foreign investors rush to buy stake in Vietnamese businesses

FIA (the Foreign Investment Agency) said there were 654 deals of foreigners’ capital contribution and share purchase in the first two months of the year, with the total contributed capital of US$619 million, four times higher than that of the same period of last year.

Foreign investors mostly targeted businesses in the manufacturing and processing sector with 220 deals made in the field, worth US$292 million. 

The fields of wholesale & retail and vehicle repair also attracted foreign investments with 197 deals made, worth $124 million. Real estate was the third attractive sector which had 14 deals, valued at US$60 million. 

Ho Chi Minh City saw the highest number of capital contribution deals (322 deals, US$313 million), followed by Hanoi, Binh Duong, Nghe An and Quang Binh.

In fact, foreign investors began buying into Vietnam’s businesses many years ago, but the movement only became clearer in 2015. In M&A deals, for example, Vietnam’s businesses seek capable partners in the context of global integration.

From July 1, 2015 to July 20, 2016, foreign investors contributed capital and bought into 3,000 businesses with the total value of US$2.9 billion. In 2016 alone, 2,547 Vietnam’s businesses received foreign shareholders with foreign ownership ratios at over 50% or in conditional investment fields, valued at US$3.425 billion in total.

This occurred after the 2014 Investment Law took effect. Under the new regulations, foreign investors don’t have to apply for investment registration certificates when contributing capital or buying into Vietnam’s businesses. They only have to follow registration procedures at state management agencies.

Analysts said simple administrative procedures have prompted foreign investors to buy a stake in Vietnamese businesses.

However, Nguyen Tri Hieu, an economist, warned that state management agencies should not be too optimistic about the foreigners’ capital contribution, because no one can say for sure if the capital will keep flowing into Vietnam in the last months of the year.

The changes in the world’s economies and unpredictable policies applied by the US administration are contributing to an uncertain atmosphere. If foreign investors are uncomfortable about new policies, they may withdraw capital from new emerging markets, including Vietnam.

According to Hieu, simplified laws affect foreign investors’ decisions. However, they will only make investments if they can see bright prospects in Vietnam’s economy.

Therefore, in order to encourage foreign investors to pour money into Vietnam, the country should try to enhance its national credibility.

To date, Vietnam still is not among the countries that Standard & Poor's, Moody's and Fitch have advised investing in.