Foreign investment in Vietnam has played a pivotal role in driving the country's economic growth and development. Over the years, numerous industries have attracted foreign investors due to Vietnam's favorable business environment, skilled workforce, and strategic location within Southeast Asia. Here are some of the key industries that foreigners have been investing in Vietnam:
Technology and Digital Innovation
Vietnam's technology sector has been rapidly evolving, making it an attractive destination for investors who want to invest in Vietnam and looking to tap into the digital transformation wave. The country's youthful population and increasing internet penetration create a fertile ground for tech startups and innovations. E-commerce, fintech, health tech, and edtech are areas experiencing substantial growth. With the government's focus on promoting a digital economy, investments in tech infrastructure, software development, and digital solutions are likely to yield significant returns.
Masan has successfully achieved digital transformation
Renewable Energy
Vietnam’s renewable energy sector is advancing rapidly as the country prioritizes energy security and addresses environmental concerns. With abundant natural resources and a growing commitment to sustainable development, Vietnam has emerged as a key destination for investment in renewable energy..
- Government Targets: Vietnam has set ambitious goals for renewable energy capacity. By 2030, it aims to achieve a renewable energy contribution of 30% of the total energy mix, significantly expanding solar, wind, and biomass energy production.
- Incentives for Investors: The government has introduced supportive policies, including tax exemptions, feed-in tariffs (FiTs), and power purchase agreements (PPAs), to reduce investment risks and attract foreign and domestic capital.
- Solar Power: With over 16,000 MW of installed solar capacity by 2023, Vietnam leads Southeast Asia in solar energy development and plans to reach 20,000 MW by 2030.
- Wind Energy: The country’s 3,000-kilometer coastline makes it an ideal location for wind farms. By 2025, Vietnam targets 6,000 MW of wind energy capacity, with significant room for expansion in offshore projects.
- Biomass Energy: Vietnam leverages its agricultural sector to produce energy from biomass, offering an additional opportunity for investors in the renewable energy value chain.
The combination of Vietnam's supportive policies, growing market demand, and natural resource availability makes it an ideal destination for financial investment in Vietnam for renewable energy.
Manufacturing and Industry 4.0
Vietnam's position as a manufacturing hub is strengthened by its strategic location within Asia, providing easy access to key global markets and supply chains. The nation's skilled and adaptable workforce is an asset, attracting financial investment in Vietnam from investors looking for both quality and cost-effectiveness in production.
The adoption of Industry 4.0 technologies, such as automation, artificial intelligence, and advanced robotics, is reshaping Vietnam's manufacturing landscape. These advancements improve production efficiency and product quality, making the country a competitive choice for high-tech manufacturing.
Foreign investors are particularly drawn to Vietnam’s robust manufacturing ecosystem, which includes well-developed industrial parks and specialized clusters for electronics, textiles, and machinery. This ecosystem supports efficient operations and fosters innovation.
Vietnam's integration into multiple free trade agreements enhances its export potential, reducing barriers and opening new markets for its manufactured goods. These agreements also encourage the localization of supply chains, promoting long-term investment in supporting industries like component manufacturing and logistics.
In industries such as textiles and footwear, Vietnam combines traditional expertise with modern techniques, catering to global demand while maintaining competitive pricing. Similarly, the electronics and automotive sectors benefit from government incentives and partnerships with international companies, further solidifying Vietnam's role in global supply chains.
Vietnam has become a key player in global manufacturing, with exports from the sector accounting for over 85% of the country's total export turnover in recent years.
Healthcare and Pharmaceuticals
With an aging population and rising middle class, the demand for quality healthcare services and pharmaceutical products is on the rise. Vietnam's healthcare sector is undergoing reforms and modernization, offering significant to invest in Vietnam. Hospitals, medical equipment manufacturing, pharmaceutical production, and telemedicine are areas poised for growth. Besides, with an aging population and increasing health awareness, foreign investors have shown interest in the pharmaceutical and healthcare sectors.According to Dan Tri, last July, Thomson Medical Group agreed to acquire a controlling stake in Phap Viet Hospital for US$381.4 million (approximately VND9,000 billion), the largest-ever commercial transaction in the healthcare sector.
The pharmaceutical brand Dr. Win is integrated into WinMart stores.
"France Viet Hospital gives us a strategic position in Vietnam. It is also a gateway to growth and focuses on future investment accounts in this rapidly growing market. ", Mr. Kiat Lim, vice president of Thomson Medical, told Bloomberg.Infrastructure and Real Estate
As urbanization continues, Vietnam's infrastructure requirements expand. The government's focus on improving transportation networks, urban development, and connectivity creates opportunities for investments in infrastructure projects like roads, bridges, ports, and airports. The real estate sector, including residential, commercial, and industrial properties, also remains an appealing choice for investors. Specifically, foreign investors have shown interest in Vietnam's real estate market, particularly in commercial and residential properties. Urbanization and increasing demand for housing, office spaces, and retail developments have contributed to foreign investment in the construction and real estate sectors, making this sector a promising destination for financial investment in Vietnam.In recent news, the esteemed news agency Reuters has conveyed that CapitaLand Development, the real estate division of Singapore's CapitaLand Group, is currently in discussions about acquiring a portion of Vinhomes Joint Stock Company (stock code: VHM) – a vital component of the prominent Vingroup conglomerate. As per sources cited by Reuters, the potential value of this proposed transaction is a substantial 1.5 billion USD. To delve into specifics, CapitaLand Development is exploring the prospect of obtaining a stake in Vinhomes' Ocean Park 3 project, an extensive resort-style urban development spanning an expansive 294-hectare area located in close proximity to Hanoi. Alternatively, the company is also considering engagement in another project situated to the north of Hai Phong City.
Agribusiness and Food Processing
Vietnam’s agricultural sector remains a cornerstone of its economy, contributing approximately 14% to the GDP in 2023. The country’s agricultural exports reached an estimated $53 billion in the same year, showcasing its strength as a global supplier.
Vietnam's agricultural sector stands as a cornerstone of its economy, offering significant opportunities for financial investment in Vietnam. The country’s fertile land, diverse climate, and strategic location in Southeast Asia have made it a leading exporter of agricultural products such as seafood, fruits, and coffee. Key areas for exploration include:
- Food Processing Industry: Transforming agricultural products into packaged goods and ready-to-market items caters to growing consumer demands both locally and internationally.
- Sustainable Agriculture: Growing interest in organic and environmentally conscious farming methods opens up new possibilities for modern farming techniques.
- Export Potential: As a major global supplier of seafood, tropical fruits, and coffee, Vietnam's focus on export-ready agricultural goods provides attractive entry points for investors.
- Technology in Farming: Adopting modern tools such as smart irrigation systems, automated harvesting machines, and data-driven farming techniques is reshaping production efficiency and market competitiveness.
Foreign investors are increasingly drawn to Vietnam’s agricultural sector due to its natural resources, supportive policies, and strong global demand for its products. These factors collectively position the sector as a promising area for long-term growth and development.
Education and Training
As Vietnam's population becomes increasingly education-oriented, the demand for quality education and training services continues to grow, creating substantial opportunities for financial investment in Vietnam. Education spending in Vietnam accounted for 5.8% of the GDP in 2022, reflecting the country’s prioritization of this sector. Key areas for investment include:
- Edtech Platforms: The rise of digital learning tools and platforms has been significant, driven by the adoption of technology in classrooms and remote learning environments. Innovative solutions in this field present exciting opportunities for investors.
- Vocational Training Centers: These centers cater to the growing need for skill-based education, especially in high-demand sectors such as IT, healthcare, and engineering.
- International Schools: The increasing demand for globally recognized curriculums and high-quality teaching standards has driven the growth of international schools across major cities in Vietnam.
- Higher Education Institutions: Universities and colleges offering specialized courses and partnerships with international institutions attract significant attention from investors.
The Vietnamese government has been proactive in encouraging private sector participation in education to meet the growing demand for quality learning and training services. In 2019, it introduced Resolution 35/NQ-CP (“Resolution 35”), which aims to mobilize social resources for education and training development. Key targets outlined in the resolution include:
Foreign investors are increasingly tapping into these areas, recognizing Vietnam's strong focus on educational development and its strategic importance in the region.
Consumer Goods and Retail
Masan Group bought 85 percent of Phuc Long, marking a major M&A deal in Vietnam's retail sector.
In April 2021, SK made another significant financial investment in Vietnam, investing $410 million for a 16.26 percent stake in Masan Group's VinCommerce, now known as WinCommerce.
Collectively, the Korean conglomerate has infused more than $1.2 billion into Masan and its affiliated entities. This marks SK's largest financial commitment within Vietnam. Woncheol Park, representative director of SK Southeast Asia Investment, expressed the group's strong support for Masan Group, emphasizing their unwavering investment in the company. He highlighted their confidence in Masan's growth strategy, which revolves around introducing the 'mini-mall' concept and establishing a robust consumer platform, ultimately yielding substantial benefits for all stakeholders involved.
Furthermore, in May 2021, a consortium of investors, including Alibaba Group and Baring Private Equity Asia, with the purpose of investing in Vietnam, executed a financial deal amounting to $400 million. This transaction secured a 5.5 percent ownership in The CrownX, Masan's integrated consumer retail platform that brings together Masan Consumer Holdings and WinCommerce (WCM). This financial agreement further solidifies the shareholders' vision of creating Vietnam's inaugural tech-enabled consumer-retail ecosystem while extending its outreach to cater to consumers nationwide. Invest in Vietnam's growing tech and retail landscape is evidently gaining traction.
Besides, in a recently issued report, J.P. Morgan underlined: "Vietnam represents the most captivating and remarkable growth narrative for consumption in Asia" and offered a positive perspective on Vietnamese consumer stocks within the upcoming 12 months. In accordance with the assessment provided by the organization, Vietnam's consumer retail market is poised for robust expansion due to a rapidly growing economy, the expansion of the middle class, and the increasing pace of urbanization. J.P. Morgan predicts that Vietnam is on track to become a prominent growth driver in consumption across the region.
Furthermore, as outlined in this report, utilizing the SOTP (sum-of-the-parts) approach, J.P. Morgan assessed Masan group stock price to be valued at 102,000 Vietnamese dong per share, marking a 26% increase from the price of 80,500 dong per share observed on July 18. The SOTP method involves valuing each subsidiary or business division of a company independently, subsequently aggregating these valuations to determine the overall company value.
In terms of projections, a target P/E (price-to-earnings) ratio for 2024 stands at 34x, indicating a valuation roughly 40% higher than similar companies in the region. This projection is supported by an anticipated year-over-year EPS (earnings per share) growth of 36% from 2023 to 2025.
In essence, the valuation of Masan stock price at 102,000 VND/share by J.P. Morgan is underpinned by these factors.
Financial Services and Banking
The financial services sector, including banking, insurance, and fintech, has attracted foreign investment to invest in Vietnam due to Vietnam's growing consumer base and increasing demand for financial products and services.Recently, VPBank stands at the threshold of executing a monumental equity transaction that is set to make history in the Vietnamese banking sector. This pivotal move holds the promise of enriching its financial offerings and expanding a burgeoning portfolio of Japanese clientele through a strategic partnership with the formidable institutional entity, SMBC.
In a recent development, Sumitomo Mitsui Banking Corporation (SMBC), a crucial subsidiary of Sumitomo Mitsui Financial Group (NYSE: SMFG), has formally injected a substantial amount of $1.5 billion into VPBank. This significant investment cements SMBC as a strategic ally for VPBank, marking a milestone as the largest merger and acquisition (M&A) deal ever accomplished in the history of Vietnam's banking industry. Importantly, this transformative investment elevates VPBank to the position of the second-largest bank in terms of equity within the national financial landscape, second only to Vietcombank. In a previous instance, a fellow member of SMFG, the consumer finance powerhouse SMBC, had undertaken a noteworthy venture by investing $1.4 billion to acquire shares of FeCredit, valuing the financial institution at $2.8 billion.
Vietnam's dynamic economy and proactive government policies present a range of promising investment sectors for 2023. However, navigating the market requires careful research, an understanding of local regulations, and strategic planning. Whether investing in technology-driven innovations, sustainable energy projects, or emerging industries, those who make informed decisions are likely to reap the rewards of Vietnam's economic potential in the years to come. Make strategic financial investments in Vietnam to leverage its growth potential.