Vietnam: A bright spot for financial investment in Vietnam - Startups
According to a new report by Enterprise Singapore and DealStreetAsia, financial investments in Vietnamese startups reached only $510 million in 2023. That means a decrease of 30% from 2022. However, this is not the end of this potential start-up market. On the contrary, this decline is an opportunity for foreign investment funds to see Vietnam as a potential spotlight with many competitive advantages and attractive investment opportunities.
Potential market
Strong Growth Economy: Vietnam is one of the fastest growing economies in the Asia-Pacific region with an average GDP growth rate of 6-7% per year for many years.
In 2023, Vietnam's GDP is estimated to increase by 5.05% from 2022. Despite not reaching the 6.5% target due to the influence of many factors such as pandemics, global economic volatility, etc., Vietnam remains one of the fastest growing countries in the region and in the world.
To make it easy to imagine, if Vietnam's GDP reached $1,614 per person in 2010, it reached $4,284 per person by 2023. During the period of Covid-19 spread in 2020 and 2021, Vietnam became one of the few Asian countries that did not fall into a severe economic downturn in the pandemic. This shows that the Vietnamese economy is well resilient, capable of adapting to the fluctuations of the international economic environment.
According to Forbes, "Vietnam is one of the few economies that survived the pandemic quite well." The prestigious financial magazine also writes: "Vietnam's per capita GDP has grown most impressively among all the countries in the world. This trend reflects the dynamics of Vietnam’s economy and the country’s outstanding development over the years.” In addition, the Government of Vietnam is committed to macroeconomic stability and improving the investment environment to attract domestic and foreign investment.
According to Nguyen Thi Huong, Director of the General Statistics Office of Vietnam, the growth of the Vietnamese economy in 2023 is supported by a number of policies. The first is an effective combination of fiscal and monetary policy that helps to control inflation in a safe zone, keep the macroeconomy stable, and create an enabling environment for business growth. The second is the "backbone" of the economy is agriculture. Thirdly, the recovery of the service sector, with a bright spot coming from the tourism industry. Fourthly, industrial activity is steadily recovering, with production indices surprisingly slightly increasing. At the same time, the key driving force for growth comes from the government's increased disbursement of public investment.
Improved infrastructure: The Vietnamese government is investing heavily in infrastructure such as transport, energy, telecommunications, etc. The increasingly improved infrastructure system reduces operating costs and increases competitiveness.
A young and dynamic population means abundant worker and abundant development of large consumer markets: At present, Vietnam is ranked 15th in the world, top three in Southeast Asia in terms of population size and has a high percentage of people in working age. Specifically, by 2023, Vietnam's population reached 100.3 million, with a gender balance (49.9% of men and 50.1% of women).
According to HSBC, these demographic characteristics give the Vietnamese economy great strength. Large-scale, young, dynamic and tech-savvy. Worker participation is more than 73% and the rate of urbanization is rising at 38%. Vietnam’s working age rate continues to rise at 0.4 per cent annually, while China, Japan, Thailand and Singapore are falling.
With the fast-growing middle-income class, increasingly diverse and high-end consumer demand, Vietnam is on the verge of becoming a consumer market of the future. This offers great Vietnam business opportunities for both domestic and foreign investors.
Viet Nam's workforce is also appreciated for its skill, diligence and creativity. At the same time, the quality of training has also changed positively over the years, contributing to the development of skilled human resources. The training process in Vietnam has gradually shifted from “supply” to “demand”, linked to the human resources needs, the demands of employers of enterprises, domestic employers and foreign FDI investors. It is remarkable that Vietnamese laborers have won many medals, certificates of excellence in ASEAN regional and world competitions, showing great potential.
The investment environment in Vietnam is increasingly favourable for foreigners: With the motto "Investor success is also Vietnam's success", Vietnam encourages foreign investors to invest and do business. The government has been improving the investment environment by building a transparent legal system, reducing administrative procedures and promoting international integration. Through tax incentives, factories, labor, supplies of raw materials, infrastructure, etc., creating opportunities and attracting foreign capital. Vietnam has signed many important free trade agreements such as the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) and the Vietnam-EU Free Trade Agreement. (EVFTA),... Create opportunities for Vietnamese to connect with international investors. As a result, foreign financial investment in Vietnam is becoming increasingly vibrant, with many multinational corporations and large enterprises investing in the country.
Competitive Advantages of Vietnamese Startups
The growth of the Internet and technology is driving the dynamic digital economy, opening up many opportunities for startups in this field. According to predictions by Temasek and Google, Vietnam's Internet economy will be worth $45 billion by 2025.
Vietnam’s digitization efforts are creating a new wind for the startup market. Create new opportunities and demand for startups that can provide technological solutions to improve existing systems in areas such as agriculture, services, education, finance, logistics, etc.
Vietnam’s startup market has distinct advantages such as lower operating costs compared to countries in the region; Young, well-educated, highly skilled and fast-trained human resources; Large-developed landscape... Vietnam’s startup ecosystem is still growing strongly, with many coworking spaces and funds to support startups. The Government commits to support foreign investors making financial investment in Vietnam. The Vietnamese government also showed positive support for the startup community. Through many commitments to support startups and create a favourable investment environment for international investors.
Opportunities for foreign funds to make financial invest in Vietnam
According to a report by Enterprise Singapore and DealStreetAsia, financial investments in Vietnamese startups reached only $510 million in 2023, shrinking from $700 million by 2022. That means a drop of almost 30 percent. However, this is also the lowest drop in Southeast Asia.
It may be said, this is a good time for investors to observe, re-evaluate the potential to make financial investments in the Vietnam market. During the “capitalization winter” period, startups have time to stop intense capital-raising activities and focus on more important aspects such as products, people, and customers.
Hard time calling is a time for startups to focus on improving the effectiveness of internal management. Anyway, the goal of an investment deal is to create a business that is capable of real growth and building clear social values.
On the other hand, it is also an opportunity for foreign investors to learn and evaluate the financial investment prospects in Vietnam and the quality of Vietnamese startups. At the same time, “bottom fishing” and investing in startups that are attractively low-priced and undervalued. As a developing country, all sectors like financial technology, e-commerce, education, health care, etc. are posing problems in the economic growth process. As a result, there are many opportunities for startups to apply technology to innovate and solve these problems. Many startups in Vietnam now have innovative business models, talented founding teams. Enough material to grow strong in the future.
The price of financial investment in Vietnamese startups is relatively reasonable compared to the potential for profitability. Especially when Vietnam is a safe and attractive destination, with an increasingly improved and transparent financial investment environment. And the government encourages foreign investors to engage in the startup sector, creating incentives and support policies.
That is why, with the opening of financial investments in Vietnam, foreign investment funds should study the market thoroughly and select potential startups. At the same time, foreign funds can cooperate with local investors, Vietnam investment funds, and prestigious financial entities in Vietnam to obtain the necessary information and support. Additionally, they should participate in the activities of the Vietnamese startup ecosystem to connect with other investors and startups.
Despite the challenges of the global economy as well as the investment market in 2023, Vietnam remains a spotlight for international investment funds with many competitive advantages and attractive investment opportunities. Financial investing in Vietnam, especially in the startup sector, is a wise decision with high potential for returns in the medium and long term.