State urged to encourage more outward investment

February 22, 2023 | 13:00
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Vietnamese businesses are steadily increasing their investments overseas, but there is still a strong reliance on the purchasing of shares.
State urged to encourage more outward investment
Companies like Viettel have spent many years involved in outward investment activities, photo Le Toan

Through its subsidiary, The Sherpa, Masan Group will spend $105 million to acquire a 25 per cent stake in Trust IQ. On the sidelines of Prime Minister Pham Minh Chinh’s official visit to Singapore nearly two weeks ago, the Ministry of Planning and Investment (MPI) presented a certificate issued to a Masan Group representative.

Trust IQ is the parent company of Trusting Social, a fintech startup operating in Vietnam, well-known for its credit score tool. Midway through the previous year, Masan invested $65 million to acquire one-quarter of Trusting Social’s capital.

Vietnam’s outgoing investment in general continues to rise. According to the MPI, $426.6 million was invested overseas last year for 109 projects, up 78.7 per cent in the number of projects and 4.3 per cent in capital on-year. The capital was poured into many sectors such as industry, manufacturing, communications, finance and banking, commerce, mining, and agriculture.

Accumulatively by late 2022 Vietnam boasted around 140 valid ventures in Singapore, registered at around $586 million.

Last year, Vietnamese capital continued to perform well in the global market, as several investors sought to diversify local market risks and increase profits.

Towards the end of 2022, Nutifood announced the purchase of 51 per cent of Cawells from Sweden. Tran Bao Minh, vice president of Nutifood, said that acquiring a brand from the EU was in anticipation of a rise in the food supplement sector in the hugely populous Asian market over the next several years.

Minh said that to make Nutifood the premier nutritious food brand in Asia and to swiftly introduce the product to the European market, the company intends to purchase several high-quality American and Australian brands.

Vietnam has concentrated on investing in its home market for economic growth for decades. According to economic expert Dr. Nguyen Tri Hieu, Vietnam’s outside activities should only “concentrate on economic necessities”. “To achieve this, the state should assist enterprises to invest with confidence and generate profits,” he said.

Based on a report published in October 2022 by the Institute of World Economics and Politics of the Vietnam Academy of Social Sciences, global investment flows in 2023 may lack sustainability, and will likely slow down or remain stable.

“Uncertainty will surround new projects, while funding flows in sectors connected to sustainable development objectives remain low, notably in agriculture, healthcare, and education,” the report noted.

On a global level, the report added, funding into green projects declined by 21 per cent in the first quarter of 2022; merger and acquisition operations decreased by 13 per cent, and overseas-financed projects decreased by 4 per cent. In addition, the investment capital flow of international corporations is just one-fifth of its pre-pandemic level.

Prof. Nguyen Mai-President, Association of Foreign Invested Enterprises
State urged to encourage more outward investment
Several significant projects have been accomplished, adding to the country’s balance of international payments and strengthening its foreign currency reserves as a result.

In the next 5-10 years, the value of Vietnamese firms’ overseas investments may surpass $1 billion each year, up from around $700 million per year currently. To boost the rate of success, however, financiers must thoroughly examine the investment climate.

In April 2022, we launched an office in Ho Chi Minh City with the mission of serving as a focal point and aiding Vietnamese enterprises in understanding legal, business, and cultural environments for investing overseas.

According to the Ministry of Planning and Investment, Vietnam boasted just over 1,600 legal outbound investment projects overseas worth $21.75 billion as of December 20, 2022. This includes 139 state-owned projects registered at $11.6 billion, representing 53.3 per cent of the country’s overall outbound capital.

The mining sector accounts for one-third of Vietnam’s investment overseas, followed by agro-forestry-fishery (15 per cent). Laos (24.6 per cent), Cambodia (13.6 per cent), and Venezuela (8.2 per cent) attain the highest investment from Vietnam.

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Bilateral links between Australia and Vietnam have developed significantly since the establishment of diplomatic relations in 1973. Despite differences in the likes of legal systems and culture, both nations still share the ambition to promote bilateral trade and investment.

By Hai Van

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