Why are financial investments in Vietnam attractive to foreign funds?
In post-COVID-19, the Government is committed to ensuring a stable socio-political environment, protecting investors' interests, and creating an enabling environment for FDI enterprises. Moreover, in 2022, the Vietnamese economy has recovered more rapidly than the world. Projections from the Foreign Investment Agency under the Ministry of Planning and Investment (MPI) indicate that Vietnam is likely to continue attracting substantial FDI, with estimates ranging from US$36-38 billion in 2023. Thus, financial investment in Vietnam is still attractive in the time to come.
Overview of financial investment in Vietnam
Since the Government reopened the economy in 2021, switching from a "Zero-Covid" policy to a "Living with Covid" policy, Vietnam's economic growth is estimated to rebound. Domestic demand for consumption increased rapidly from the second quarter when the COVID-19 infection rate dropped sharply. This makes a financial investment in Vietnam more attractive and competitive. As a result, the Central Institute for Economic Management (CIEM) predicted an optimistic forecast for Vietnam's economy in 2022. In the best-case scenario, Vietnam's economic growth this year can reach 6.9%. HSBC also has the same growth forecast for 2022 as CIEM.
According to SSI Strategy Report, the Vietnamese Government's priorities are to tackle inflation first, followed by growth when inflation risk fades. Then the year 2023 will be a year of investment-driven growth. The strong fundamentals of Vietnam's economy come from two main factors: compelling domestic demands (thanks to favorable demographic, social and political stability). At the same time, external drivers remain favorable and a solid export-driven economy and committed integration into global value chains. Thanks to solid exports and consumer spending, Vietnam's GDP grew 7.72 percent in the first half of 2022. As a result, stimulus packages could accelerate in 2H22, but it is expected that most parcels to be disbursed in 2023. On the other hand, financial investment in Vietnam remains the crucial driver of economic growth.
In the half of 2022, the financial investment in Vietnam achieved the highest increase since the beginning of the year. That shows enterprise efforts on constantly recovering, maintaining, and expanding production and business activities. As of June 20, 2022, Vietnam's total foreign financial investment made significant momentum with USD14 billion. Furthermore, with a recovery in exports and manufacturing, Vietnam's economic growth in the second quarter helped offset risks from the pandemic and rising oil prices.
Vietnamese consumers' consumption demand increased significantly.
In the medium and long term, political conflicts such as the Russia-Ukraine crisis could lead to a trend of shifting investment to Asian countries, especially Vietnam. In these scenarios, financial investment in Vietnam will be increased. As a result, the domestic business environment is continuously improving, and manufacturers are optimistic about business prospects in the present and the upcoming time.
"The uptick in consumer spending growth over 2022 will come as the wider Vietnamese economy recovers, facilitated by the country's ongoing vaccination drive and improved disease-resistance among the population, making disruptive lockdowns less likely in 2022", Fitch Solutions shared in a report.
In post-COVID-19 time, the consumption demand of Vietnamese consumers got strong growth. Besides, Vietnamese consumers are getting younger, diversifying their consumption, living a more digital lifestyle, and demanding more personalized attention, convenience, and accessibility. Vietnam also has a sizable young population and a middle-class population that is expanding quickly. This segment is willing to spend and easily adapts to multi-channel marketing if it provides convenience. This new approach requires rethinking a consumer insight model in the next step of consumer, consumer- tech. This is also a critical part that attracts financial investment in Vietnam.
Transforming to attract financial investment in Vietnam
Global investors have paid close attention to Masan as a leader in the consumer and retail industries with a strong corporate governance basis and a sustainable development plan. Moreover, Masan has shown its global appeal during the pandemic by announcing cooperation agreements with several foreign investment funds. As a result, in the total financial investment capital into Vietnam in 2021, Masan Group has lured an investment capital of USD2.3 billion from foreign funds and corporations.
SK Group had invested USD410 million in buying 16.26 percent of WinCommerce and USD345 million to buy a 4.9 percent stake in The CrownX of Masan Group. A group of investors, including Alibaba Group and Baring Private Equity Asia (BPEA), invested a total cash consideration of USD400 million to acquire a 5.5 percent stake in The CrownX (TCX), a key business pillar of Masan Group. It gives TCX a valuation of USD8.2 billion, equivalent to USD105 per share, and marked the final round for the TCX ecosystem funding. By the end of 2021 The CrownX has attracted over USD1.5 billion from marquee global investors.
Starting as a fast-moving consumer goods company, Masan came into the retail sector in 2019 and is on its transformation journey to be a consumer-tech enterprise. At this time, Masan has been focused on digital transformation to boost consumer retail. The digital economy and digital ecosystem development make financial investment in Vietnam more attractive to foreign direct investment.
Masan determined the best way to apply technologies to solve unmet needs and bring outstanding consumer benefits/ Masan’s most significant asset is a large customer base with millions of daily transactions. Danny Le – CEO of Masan Group explained that when Masan aims to provide consumers with personalized experiences and possibly expand into digital entertainment, the group needs big data applications to solve emerging problems.
In 2021, Masan cooperated with e-commerce giant Alibaba to promote the retail of essential goods on online channels. This agreement has accelerated the group's digital transformation process while optimizing and saving costs and improving customer service quality. In the same year, Masan also laid the digital foundation by acquiring Reddi mobile network to build its loyalty program.
Masan invested in Trusting Social, a fintech company that provides artificial intelligence [AI] and machine learning [ML] solutions. Along with using AI and ML and cooperating with banking partners to provide credit services, Masan also focuses on developing the Point of Life ecosystem to understand each consumer's transaction and customize offers based on their purchase history. The best way to serve 100 million consumers is to bring the group's most optimal technology solutions to traditional trading partners.
Dinh Thi My Loan, Chairwoman of the Vietnamese Retailers' Association said, domestic retail firms need to catch up with new trends, reform their business strategies to grow further, and attract more financial investment in Vietnam. Masan is one of the leading conglomerates in Vietnam, pioneering this reform strategy.
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