Singapore a faithful growth partner

CapitaValue Homes Limited, CapitaLand Group’s strategic business unit focusing on building good value homes in Asia, in May signed an agreement to acquire a 65 per cent stake in domestic Quoc Cuong Sai Gon Company for $5 million.

By acquiring a stake in this company, the Singaporean developer will be involved in the development of a 9,000 square metre project in Binh Chanh district, Ho Chi Minh City. It is CapitaLand’s fourth homes projects in Vietnam, bringing its total of over 4,200 value homes in Asia.

The new investment shows CapitaLand still has strong confidence in Vietnam’s market, despite an unstable economy. “CapitaLand is committed to being a long-term real estate player in Vietnam,” the group said in a statement released in May.

But CapitaLand is not the only Singaporean firm maintaining confidence in Vietnam. Sembcorp, a big Singaporean firm, also has strong confidence. Low Sin Leng, executive chairwoman of Sembcorp, said the firm was seeking new investment opportunities in Vietnam, especially in power, water treatment and environment treatment sectors.

“Vietnam continues to be one of the top considerations for Singapore businesses and investors looking to grow,” said Raymond Lui, centre director of International Enterprise Singapore in Hanoi.

He said the country’s proximity to Singapore, 46 million-strong workforce and Vietnamese government’s efforts to promote economic stability had cemented confidence of Singaporean firms in Vietnam.

Recent deals signed between Singaporean and Vietnamese companies are testament to their confidence in Vietnam’s long term potential.

Besides CapitaLand, Singapore’s NTUC Fairprice entered a joint venture with Saigon Co-op in December, 2010 to set up a chain of hypermarkets in Vietnam, expected to be operational by 2012.

Figures from Vietnam’s Foreign Investment Agency indicates that Singapore is the second largest foreign investor in Vietnam from January to July this year with new investment commitments for 54 projects, capitalised at $1.41 billion.

Till now, Singaporean companies committed to invest in 937 projects with total capital at $23.2 billion.

And even foreign investment direct inflows are reducing in Vietnam, lot of Singaporean investors have still been coming to Vietnam for seeking new business opportunities in four sectors.

The first was urban solutions and infrastructure, Lui said. Vietnam’s cities urbanising at a rapid rate create a potential for Singapore companies to invest in this country.

Leading Singapore’s property developers including CapitaLand, Kepple Land and GuocoLand are present in Vietnam. Sembcorp, via joint venture Vietnam-Singapore Industrial Park Joint Stock Company, is also expanding investments in real estate sector in Haiphong city, Bac Ninh and Binh Duong provinces.

In the energy sector, the recently approved electricity master plant VII indicates Vietnam will need a huge capital for power development. The investment demand attracts attention from Singaporean investors.

“Singapore-based companies are keen to invest in reliable, efficient sources of power. Furthermore, Singapore-based companies have world-class engineering and logistics capabilities that support the energy sector. Our companies can provide services in plant design, construction, and maintenance for large projects such as the Nghi Son refinery,” said Lui.

Actually, Sembcorp Industries was one of the earliest foreign participants in Vietnam’s power sector through its investment in the 749 megawatt Phu My 3 power plant in 2001.

In 2009, Singaporean firm Ezra Holdings, an integrated support and marine services provider in the oil and gas sector, secured a contract to operate a new floating production, storage and offloading vessel for Vietnam’s Chim Sao oil project.

The consumer market is among the most interesting sectors for Singaporean companies. With Vietnam’s large and fast-growing consumer market, there are opportunities for Singapore-based companies to offer consumer-related products and services to meet rising demand by the population, especially the growing middle income group

The growth of the retail industry, for example, shows the strong potential for investments and partnerships. Vietnam’s domestic apparel market grew by 9 per cent in 2010 to reach $2.1 billion. Its retail market is expected to continue to see average value growth of 4 per cent in apparel each year to 2015. Top Singaporean brands that are in the market include Charles & Keith, Pretty Fit and Heatwave.

NTUC Fairprice’s joint venture with Saigon Co-op to establish hypermarkets in Vietnam is another example of the potential in Vietnam’s consumer market.

The last sector that Singaporean companies want to involve in is trade and services. According to International Enterprise Singapore, Vietnamese exporters in the agriculture space can leverage Singapore’s position as a major trade and finance hub in Asia to attain sustainable development.

“They can partner Singapore-based companies who can contribute expertise in the upstream areas of food safety, quality management and research and development and the downstream areas of supply chain, retail and distribution and trading and finance,” said Lui.