Vietnamese enterprises increase investment abroad

Vietnam's investment abroad has seen remarkable changes with the focus now on professional activities, science and technology, and manufacturing instead of wholesale and retail and banking and finance as in previous years.

Confident in the US market

In July 2021, Vietnamese conglomerate Vingroup made official moves to operate in North America and Europe. VinFast Commercial and Services Trading Co., Ltd has opened branches in the US, Canada, France, Germany and the Netherlands to realise the goal of making the company a global smart electric car producer.

At the same time, VinFast announced the appointment of Michael Lohscheller, former vice president of Volkswagen USA and general director of Opel Global, as general director of VinFast Global.

VinFast said that over the past year it has rushed to perfect its apparatus, establish a business foundation in the host countries, and take advantage of the opportunity to conquer the world as Europe and North America announce a roadmap to ban the sale of cars using internal combustion engines and a switch to electric cars.

It is expected that VinFast will officially begin the sale of two smart electric car models, VF e35 and VF e36 globally in March 2022. Vingroup's investments abroad have helped increase Vietnam's total investment abroad in the first months of this year.

According to the Foreign Investment Agency, Vietnam's total newly registered and supplemented capital abroad reached nearly US$547 million in the first half of 2021, an nearly 2.5 times that of the same period last year. This increase mainly came from Vingroup's project in the US with increased investment of US$300 million and a VinFast project in Germany seeing investment of US$32 million.

In the same period last year, Vietnam's investment in foreign markets also increased sharply thanks to the deals of private enterprises including investment of over US$90 million of Vonfram Masan in Germany. This is a strategic step of a private Vietnamese corporation seeking to become a tungsten processor with global scale and influence.

Before 2015, overseas investment activities were led by State-owned enterprises and one of the leading enterprises in the field was the Military Industry and Telecoms Group (Viettel).

After 15 years investing abroad, Viettel has risen to become one of the largest telecommunications investors in the world and is in the Top 20 largest overseas telecommunications companies in terms of number of subscribers.

Viettel has always been a pioneer and market leader in the host countries where it holds the No. 1 position in terms of market share in Cambodia, Laos, Timor-Leste, and Burundi, ranking second in the markets of Haiti, Myanmar and Mozambique.

Viettel had invested in 10 telecommunications network projects in Cambodia, Laos, Timor-Leste, Cameron, Burundi, Tanzania, Myanmar, and Peru and in three research and development projects in France, the US and Russia by the end of 2019, with a total registered capital of nearly US$3 billion and total disbursed capital of US$1.8 billion by 2020.

The TH Food Chain Joint Stock Company (TH Group) has invested in Russia since 2015 with total investment of US$2.7 billion in ten years to implement a concentrated dairy farming and milk processing complex project and a number of food projects.

The construction of 12 clusters of TH farms in Moscow and Kaluga (the first phase) began in 2016, covering a total of 56,500ha of arable land.

Global aspiration

According to the Ministry of Planning and Investment, accumulated profit and capital sent to Vietnam from Vietnamese projects abroad reached about US$3 billion in 2020. Retained profit for reinvestment was about US$363.4 million while the number of workers sent abroad was 10,000. In addition, Vietnamese enterprises have established a significant amount of assets including factories and production facilities abroad to an estimated value of billions of US dollars.

According to the Foreign Investment Agency, the overseas investment trend has remained stable in terms of the number of projects, but there has been a big change in the investment subjects. The number of projects abroad conducted by State-owned enterprises has decreased sharply while investment capital from the private sector has rose sharply across many different fields with the participation of large private corporations.

"In terms of benefits for the country, overseas investment activities will contribute to increasing foreign currency for the country through the profits remitted from the projects, improving the competitiveness of the economy, and promoting diplomatic relations with foreign countries as well as strengthening security and defence," the Foreign Investment Agency said.

Dr. Vo Tri Thanh, director of the Research Institute for Brand Strategy and Competition, said that Vietnam's signing and implementation of many new-generation free trade agreements has also expanded the space for production and business activities as well as boosting the investments of enterprises abroad.

Investment abroad no longer focuses on areas that are considered less developed than Vietnam, such as Laos, Cambodia, and Myanmar, but has recently gone into fields with high requirements on technological innovation capacity in developed countries such as Singapore, the US, and Europe.

"We are still mostly an investment recipient but recent changes in overseas investment activities clearly reflect the improved branding and capacity of Vietnamese enterprises," Thanh noted.

Chief economist of the Bank for Investment and Development of Vietnam (BIDV) Dr. Can Van Luc pointed out the four main difficulties that enterprises are facing in investing abroad, including lower quality human resources sent to advanced countries such as the US, Canada, France, Germany, and the Netherlands.

The awareness of Vietnamese business and product brands is still limited in some markets where Vietnam invests. In addition, Vietnamese enterprises encounter potential risks due to political fluctuations, changes in investment attraction policies of other countries, and legal risk.

At the same time, the support of authorities and business associations for overseas investment activities remains limited with no mechanism to reduce risks.

These are also issues that the Government, ministries, localities, associations and businesses need to pay attention to and deal with in the future while the authorised agencies need to issue strategies to promote investment abroad for Vietnamese enterprises, Luc noted.

(Source: NDO)