Vietnam Business Foreign News: Latest Trends (June No. 2)

【FDI】To Promote Sustainable Growth, Government Attracts FDI in Clean Technology Sector

Vietnam’s Foreign Investment Cooperation Strategy for the period 2021-2030 aims to improve the efficiency and overall quality of foreign investment, and to make overall improvements in attracting and utilizing foreign investment. At the same time, it intends to attract projects with new technologies, modern management practices, and high added value to serve as a driving force for economic and social development. The main criteria for evaluation are the efficiency of the project, the technology used, the environmental impact, and the spillover effect on other industries, rather than large amounts of capital.

According to Do Thanh Trung, Deputy Minister of Planning and Investment, Vietnam’s open and flexible investment policy, improved investment climate, and stable business investment environment make the country one of the most attractive investment destinations and can achieve important results in foreign investment.

As of the end of April 2023, Vietnam has attracted about $446 billion in foreign direct investment. Of that amount, about $280 billion has actually been invested.

Despite the impact of COVID-19, Vietnam remains one of the 20 countries that attract the greatest amount of foreign direct investment, according to a report by the Center for International Trade.

At the center of the policy discussions between these member countries and the IMF is carbon pricing. It is widely recognized that carbon pricing, which puts a price on carbon, is the most important means of achieving the dramatic emissions reductions currently being sought.

By pricing carbon-emitting energy sources above clean energy, carbon pricing is supposed to create incentives for greater energy efficiency and promote innovation in the green technology sector.

The IMF recommends establishing a carbon price of at least $75 per ton before 2030; in the IMF’s view, countries will not be able to provide incentives for businesses and consumers to change unless they establish a carbon price of at least $75 per ton by 2030. The IMF said that this would not be possible.

The IMF further states that budget revenues from carbon pricing will help households and businesses make the energy transition, reduce debt, and achieve effective investments and energy initiatives. It notes that widespread adoption of carbon pricing is equivalent to encouraging the purchase of current CO

【Construction】Demand for industrial real estate continues to increase.

In 2023, the industrial real estate market continues to see high demand. In particular, completed warehouses and factories continue to drive the market.

Vacancy rates in Vietnam’s warehouse and factory market remained relatively low through the end of 2022. Vacancy rates averaged 20% in the northern regions and 23% in the southern regions.

With regard to rental demand, production demand was observed in many industries. Specifically, these include electronic products, electronic components, semiconductors, solar energy, and textiles. In the northern region in particular, there is a trend for Chinese manufacturers to sign short- to medium-term leases in areas away from the central cities of Hanoi and Ho Chi Minh City, looking for sites for their completed factories. This suggests the possibility of establishing a production base in the future.

High demand has also been observed for cold storage facilities. While Vietnam has very high potential in the seafood market, the supply of cold storage projects is still low.

In addition, data centers are another area with a lot of potential demand. Legal issues and technical requirements need to be addressed in Vietnam, and challenges still remain to establish well-developed data centers.

E-commerce in Vietnam has seen significant development, growing 25% per year over the past five years. Against this backdrop, demand for industrial real estate is expected to continue to increase.

【Consumption Trends】50% of Vietnamese consumers are attracted by “free shipping” when shopping online.

Free Shipping” is the most influential factor in consumer behavior in online shopping in Vietnam.

According to TikTok survey data, 38% of Vietnamese consumers are influenced by reviews from previous buyers during the online shopping process. In addition, 36% of consumers make purchasing decisions based on discount coupons and rewards programs. In particular, half of Vietnamese consumers are attracted by the “free shipping” factor. This is the most powerful factor stimulating consumer purchasing behavior.

In addition, a growing number of data shows that Vietnamese consumers are choosing to purchase goods on an ever-increasing number of foreign websites. The number of people purchasing goods from foreign sellers on Vietnamese e-commerce platforms is also growing rapidly. In the presence of “free shipping” schemes, it is expected that Vietnamese consumers will further increase their transactions on foreign websites.

【Processed Food】 Vietnam’s food processing industry has great potential.

Vietnam’s processed food industry has tremendous potential, with its size accounting for approximately 20% of the total annual revenues of the manufacturing and processing manufacturing industry.

According to representatives of the Vietnamese Ministry of Trade, the food processing and manufacturing industry accounts for 19.1% of Vietnam’s total manufacturing and processing manufacturing industry output. This makes it the most important industry in the manufacturing and processing manufacturing sector, indicating its importance in meeting the nation’s food needs and export requirements.

In particular, the food processing and manufacturing industry will have access to a wider range of consumer markets and investment opportunities once the free trade agreement that Vietnam has signed takes effect. Although only about 0.1% of the total number of enterprises nationwide are active in food processing and manufacturing, it is still one of the industries with the greatest growth potential in Vietnam, as it accounts for about 20% of the total annual revenues of the manufacturing and processing manufacturing industry.

According to the European Enterprise Institute, the M&A market for the food manufacturing and processing industry in Vietnam is booming and growing rapidly. Over the past few years, there have been a very large number of food-related M&A transactions (mergers and acquisitions of food processing companies), and this trend is expected to continue into the future.

Specific examples include CJ Group (Korea) acquiring a 65% stake in Minh Dat Foods Co. and a 47.33% stake in Cau Tre Export Processing Company, Daesang Corp (Korea) acquiring a 100% stake in Duc Viet Foods Co. (Japan) acquired a 100% stake in Amiga Co. For many investors, M&A transactions are considered the most effective means of entering the Vietnamese market and expanding their businesses.

The number of M&A transactions completed in Vietnam and their value have increased sustainably over the past few years, and further growth is expected in the future. M&A activity is expected to continue to grow further, especially given the current status of the EVFTA (free trade agreement between the EU and Vietnam), which has now entered into force.