A constellation of benevolent factors for M&A activity

Deputy Minister Tran Quoc Phuong speaking at the Vietnam M&A Forum 2020

This was shared by Deputy Minister of Planning and Investment Tran Quoc Phuong at the Vietnam M&A Forum 2020 themed “Upsurging in the new normal”.

Mergers and acquisitions (M&A) have become an effective capital mobilisation channel, he added, helping to diversify investment sources for the Vietnamese economy, accelerate economic restructuring and the renewal of the growth model, and bring variety to the types of business ownership. M&A has become the shortest way for foreign companies to penetrate and enlarge their footprint in the Vietnamese market, with high efficiency and reasonable costs. The Vietnamese M&A market has reported robust growth with thousands of transactions worth nearly $50 billion over the past decade.

However, the unforeseen and unpredictable COVID-19 pandemic raging across the globe has caused massive disruptions to worldwide foreign investment and trade flows, pulling the value of M&A deals in Vietnam in 2020 down to an estimated $3.5 billion, representing 48.6 per cent of the figure in 2019.

Meanwhile, according to forecasts by UK-based independent market research organisation Euromonitor International, Vietnam is one of the world’s most dynamic and potential M&A markets, with the country’s M&A investment index projected at 102 points in 2020, only second to the United States (108.9 points). The Deputy Minister added that M&A transactions are forecast to recover in Vietnam from mid-2021, with the market size returning to the normal $5 billion.

"More importantly, in 2020, a year of impressive success, Vietnam has basically achieved the 'dual goals' of curbing the COVID-19 pandemic and maintaining macroeconomic stability along with social security," the deputy minister added. "The International Monetary Fund predicted that Vietnam is the sole country to maintain positive economic growth among the ASEAN-5 countries this year. Vietnam’s inflation was kept under control while the monetary market basically remained stable and the stock market posted positive developments. These important results are highly appreciated by the international community, reinforcing the position of Vietnam as an attractive and safe investment destination for foreign investors."

In 2020, the Ministry of Planning and Investment (MPI) presided over the work of drafting and submitting to the government and the National Assembly for approval the revised Law on Enterprises, the Law on Investment, and the Law on Public-Private Partnership Investment with many procedural reforms for market entry, thus boosting investment and business activities, including M&A transactions.

"For the first time, the list of sectors and professions with limited access to the market for foreign investors will be enacted by the government under the principle that everything that is closed for investment will be prescribed in the law. This is an important reform, giving foreign investors the same access to the market as domestic investors in all sectors and professions that are not listed in the law," Deputy Minister Phuong said.

The deputy minister added, at the same time, the MPI is also completing the drafting a new strategy on attracting foreign direct investment with the aim of prioritising the attraction of high-tech projects and those backed by advanced and clean technologies, with modern governance, and likely to yield high added values, create spillover effects, ensure technology transfer, and committing to assisting Vietnamese enterprises in joining the production chains while also offering human resources training. The government has also set up a working group dedicated to promoting FDI inflows and calling for multinational corporations and giants to grasp investment opportunities in Vietnam in the new normal.

On November 15, 2020, the Regional Comprehensive Economic Partnership (RCEP) was inked, opening up a new market that accounts for nearly 30 per cent of the global population and 29.1 per cent of global GDP. Calculations have shown that the RCEP will be like an investment package worth up to $7.2 trillion with the rate of return of 4 per cent per year while helping to increase global trade by about 1.9 per cent. The RCEP pact and other free trade agreements such as the EU-Vietnam Free Trade Agreement or the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) will also serve as a tremendous impetus for boosting regional and global trade and investment liberalisation. This is especially significant as all trade and investment activities have been disrupted by the COVID-19 pandemic.

“These important elements are ushering in new opportunities for M&A transactions in Vietnam. I believe that we will see a flourishing M&A market in 2021 and the years to come, regardless of imminent difficulties and challenges,” Deputy Minister Phuong said.

“In anticipation of the 'upsurging in the new normal', businesses and investors should transform their thinking, take more drastic and effective action, step more lively to overcome difficulties, while turning challenges into opportunities, and making good use of the opportunities arising from the Fourth Industrial Revolution, as well as the global investment shift, and making greater efforts on mobilisation and efficient use of diverse resources. An appropriate M&A strategy would become a significant tool for businesses in the current context and in the years to come,” he said.