PBEC CEO Blog on Vietnam
I have just returned to Hong Kong having finished attending and participating at this years Horasis Asia Meeting 2023 held once again in Binh Duong, Vietnam. For those of you who are unaware of this province, Bình Dương covers some 1,000 sq miles in landmass and has a population of over 3.25M according to latest consensus and is considered to be the gateway to Ho Chi Minh City, the economic cultural centre of the country.
Endowed with convenient geography conditions, Bình Dương has an extremely important road network. It is only 15 kilometres from (SGN) Tân Sơn Nhất International Airport and several important seaports. The new international airport where ground has been broken in 2022 is also located in the neighboring province of Dong Nai which will provide the province with additional air connectivity options and importance for air cargo and supply chain resilience. Over the last 15 years it has seen tremendous growth in its industrial development through attracting DFI to its designated Economic Zones and Industrial Parks managed by State Owned Becamex Corp.
It has managed to attract the likes of Lego to locate its regional manufacturing base in its Industrial Park complex. One of the first fully automated production lines in Vietnam utilising AI technology in the process creating up to 4,000 jobs overtime. There are also three golf courses and a growing residential population in the Park with social housing for workers and fully furnished apartment blocks and amenities for administrative and senior manager staff.
It has sufficient capacity to continue to offer land and the full build and management services for DFI prospects for several years to come. In the art of the Binh Duong New City Development is the Becamex Hotel and Convention center, the largest in the province. This is where Horasis Asia Meeting was held for the third time in 6 years, given 3 years of covid lockdowns in between. Each year the event co-organised by Horasis, Becamex and the Binh Duong Government has attracted over 300 delegates and speakers from across Asia Pacific, India, Europe, Middle East, Latam and North America each time. Next year it was announced it will move to Clark Development Corporation Economic Zone in November 2024 which will see another ASEAN developing nation seeking to increase international awareness of what’s available to industrial international investors as supply chains continue to evolve since the pandemic border reopening’s.
Some of my key takeaways from Vietnam on this occasion:
- The Vietnamese Government despite their own recent changes inside the party and parliamentary key positions, wishes to portray a stable situation in the country and seeks to be friends with all countries who wish to be friends, trade and investment partners in Vietnam. They will not comment or involve themselves in other countries sovereign issues or politics.
- The leadership of Vietnam are actively on the road in places like the Middle East and Turkey in recent days seeking DFI support for some of its delayed major infrastructure projects from non-traditional sources. Opening its country up to new strategic partnerships.
- Foreign direct investment into Vietnam increased 2.2% year-on-year to USD 15.91 billion in the first nine months of 2023, data from the Foreign Investment Agency (Ministry of Planning and Investment) showed. FDI pledges, which indicate the size of future FDI disbursements, advanced 7.7% from a year earlier to USD 20.21 billion.
- They are seeking new ways to develop the young workforce they enjoy in abundance, equipping students with the right tools for the future of work but also emphasis is on providing solutions for traditional production but delivering it in a more cost efficient and more environmentally friendly way.
- The youth of Vietnam want and need a seat at the table when it comes to shaping policies around the future of Vietnam, females in particular have a voice and want to participate in the countries transition.
- Women in leading roles still make up only a minority of listed and Government posts, but this is rapidly changing and Vietnamese women within the family context have always held sway in decision making and controlling the finances, and therefore it is only a question of when not if, more female leaders will emerge and PE/VC’s should put more attention and support on developing young women entrepreneurs.
- Not putting too much pressure on Vietnam too soon on climate mitigation and ESG investments, expectations one could argue are set too high and agriculture still makes up a large part of the country’s GDP. Opportunities to help rural communities and farmers to be part of the change. Education is key and to highlight the benefits of expanding their bio-circular economy.
- Vietnam number one inward investment destinations in 2023 came from Singapore, followed by South Korea, Denmark (because of Lego’s commitment), China, EU, Japan, Israel and the rest.
- In terms of expats- foreigners living in Vietnam by nationality are: French, Korean, Russian, Chinese, Japanese, Australian and then the rest.
- The anti-China sentiment has returned at the public and grassroots level due to the media focus on South China Sea fishing boat incursions between large Chinese trawlers and smaller Vietnamese fishing boats that is deemed to be in Vietnamese waters which has also damaged the internet cables under the sea on a regular basis.
- Vietnam has invested into new internet cables for communication connectivity to the other side of the country connecting with India to hedge against the tensions in the South China Sea. Despite this the Vietnam Government made it clear that they are happy to work with the Chinese and other nations as they see fit and is beneficial to its people. However the new administration is likely to be one of the more nationalist in decades and will not be bullied by other nations and therefore there is a trend of de-risking their exposure and reliance on China for trade overtime.
- On the sidelines of COP28 in the UAE, Abu Dhabi Ports Group a subsidiary of the conglomerate IHC, which has invested in Vietnam through TTEK Company in the fields of customs technologies, and digital payment solutions stated in a high level meeting with Vietnam’s PM, that IHC wants to expand investment in the country in seaports, logistics, digital transformation, smart urban areas and non-tariff zones.
- Turkish construction firm IC Holdings, has won a hotly-contested major bid for a project at southern Vietnam’s highly-anticipated Long Thanh International Airport, it also wants to build some of Vietnam’s new metro lines in the major cities that have also suffered major delays in recent years. A unit of IC Holdings is part of Vietur, a group of construction firms which has recently won the VND35 trillion ($1.44 billion) bid to build a delayed terminal at Long Thanh International Airport in the southern province of Dong Nai.
- 2024 will see some consolidation activity especially amongst the real estate sector and some technology/service firms, this is expected due to the clampdown on corruption, bad loans and bad debt as well as irregular permits and development licenses granted by the previous administration. The banks have only just started to ease the restrictions on lending in the past month and it will take time for certain projects put on hold to recommence due to legalities and in some cases the solvency of the parties involved originally.
- Despite some of the challenges for China outbound tourism rebound, Vietnam has attracted significant tourists back after the pandemic. In 2023 Korea was no.1 for Vietnam inbound visitors, China No.2 (includes HK with many likely visiting for business and leisure purpose but travelling on a tourist visa) with US No. 3 and India jumping up to no. 9 by November 2023. The surrounding countries of Malaysia/Singapore, Cambodia and Thailand are highly ranked as is Japan and Australia. Russia historically has liked Vietnam as a destination and it saw a spike after the Ukraine/Russia war broke out with several thousand Russians remaining in the country beyond the allowed 6 months seeking work locally in the entertainment, food and tourism sectors.
- Vietnam ranks 12th among Asian & Middle Eastern countries in 2023 for the best quality of life by financial news site Insider Monkey. The rankings consider three metrics: the Human Development Index (HDI), the Economic Freedom Index (EFI), and Government Effectiveness.
- There seems to be a big push by policy makers to consider new ways of doing things to accelerate and maintain the level of FDI they are currently enjoying through engagement with NGO’s, think tanks, business leaders and other governments.
- Da Nang is clearly the third major city these days after Hanoi and HCMC with a growing young entrepreneurial IT ecosystem. The quality of life in Da Nang is one of the best around at the moment with plenty of tourism supporting the local economy with the UNESCO Hoi An located only 20 KM south of Da Nang. It also boasts some of the best golf courses in the country with Jack Niklas/Greg Norman designed courses catering to the increasing number of Koreans and Japanese visitors. Bana Hills resort and the Marble Mountains also attract families and there is a vibrant Jazz and Musical/Arts scene growing in the city.
In summary like many countries in Asia especially after the pandemic, Vietnam has its own real estate bubble to contend with and work through over the coming 18 months, but the circumstances of this one is very different from the early 2000’s which saw the country suffer a decade long negative growth trajectory after its last major real estate bubble burst. This time around the damage is more limited and the country seems much better positioned this time around to be able to counter it with a strong domestic consumption economy, low unemployment, strong inbound DFI supported by favorable trade agreements Vietnam has established in the interim as one of the main winners of supply chain diversification in recent years away from China. It also has developed its tourism sector over the past decade or so and has become one of the major attractions in Asia to visit with Ha Long Bay, Hoi An and Nha Trang to name a few that have proved extremely popular.
The average median age in Vietnam is 32.8 years in 2023, which bodes well for the countries future economic growth through 2050 and beyond. If the Government can successfully execute some of the major infrastructure requirements in the coming 5-7 years, Vietnam’s future is bright indeed. This only happens though careful management of its existing resources and avoiding some of the mistakes others have suffered in a fast growth period, where the environment inevitably suffers along the way and the health of its citizens. The only thing we can be certain of is these periods of high growth cannot be sustained and its crucial for the country to build up its reserves and bolster its ability to look after an aging population down the track and remain nimble and flexible to the changes that are occurring in todays world.
Given all of the above, there are definite opportunities to invest in all areas of the economy with the right advice and trusted local partners who have the knowledge, experience and the right contacts. Education is definitely a hot area at this time and certain service sectors, as is supporting the industrial supply chains of large MNC’s locating to the country. That’s where PBEC’s value comes into its own with members and subject matter experts up and down the country that can assist you.