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According to the Vietnamese Ministry of Foreign Affairs, bilateral trade turnover between Singapore and Vietnam doubled over the past decade to reach S$20.9 billion ($15.51 billion) in 2018. Besides, Singaporean investment in Vietnam are diversified in various geographical regions and sectors, including services, processing and manufacturing, and real estate.
The Vietnamese Ministry of Planning and Investment reported that as of February 20, 2019, Singapore remained the top investor from the ASEAN bloc and third-largest foreign investor in Vietnam, with the total registered investment capital hitting $48.4 billion for 2,190 projects.
Amid the recent move to increase regional integration within Southeast Asia, Singaporean investors are continuing to fund Vietnam’s various sectors with attractive prospects.
Norman Lim, president of the Singapore Business Group (SBG), told VIR that Vietnam signing a wide range of bilateral and multilateral free trade agreements such as the Comprehensive and Progressive Agreement for Trans- Pacific Partnership (CPTPP) has enhanced the local investment environment, as well as facilitated funding from foreign companies, including those from Singapore.
He further noted that Singaporean investment spans many sectors such as oil exploration, industrial manufacturing, agriculture, and forestry and seafood processing. It also, most notably, is involved in the fields of infrastructure, business services, and real estate. This has stimulated economic growth in the country by generating more jobs, and production enhancement leading to an increase in Vietnam’s total exports.
Real estate investment from Singapore
Among different sectors which have seen funding in Vietnam, Singaporean investors are big fishes in real estate development.
Singapore’s CapitaLand has been present in Vietnam for more than 20 years, with more than 8,600 residential units in 15 projects, 6,300 serviced apartments in 24 projects, two integrated developments, and a portfolio of around $1 billion across seven major cities in Vietnam.
According to CapitaLand Vietnam’s CEO Chen Lian Pang, Vietnam plays an important role in the corporation’s development strategy as the third-largest market for CapitaLand in Southeast Asia, after Singapore and Malaysia.
“Vietnam is a key growth market for CapitaLand and we are seeing strong demand for vibrant, high-quality live-work-play spaces due to rapid urbanisation and the evolving lifestyles of young and mobile Vietnamese people. Harnessing our vast experience across different real estate types, this upcoming integrated development will offer best-in-class practices in homes, offices, and malls, which will attract young Vietnamese urbanites, multinational companies, and local startups,” Chen said.
Another big name from Singapore, Mapletree Investments, has grown to be one of the largest Singaporean real estate companies in Vietnam by capital, with a portfolio of about $1 billion in assets under management since first investing in this market in 2005.
According to Wendy Koh, regional CEO for Southeast Asia at Mapletree, Vietnam is currently the group’s largest Southeast Asian market outside of Singapore.
Other giant property developers from Singapore, such as Keppel Land and VSIP, have also invested billions of USD into the country.
Mergers and acquisitions on the rise
Besides direct investment, Singapore investors have also been active in Vietnam’s merger and acquisition (M&A) market with numerous mega deals in existence.
The largest initial public offering last year was that of luxury residential property developer Vinhomes, of which Singapore’s sovereign wealth fund GIC Private Limited recently acquired a stake. The deal made Singapore the largest investors in Vietnam’s M&A market in the first six months of 2018.
Meanwhile, CapitaLand recently agreed to buy a controlling stake in developer Ascendas-Singbridge in a deal which would value the target company at S$11 billion ($8.13 billion). A part of this fund will be poured into the Vietnamese market.
In March last year, CapitaLand announced the acquisition of two projects in Ho Chi Minh City, which will be targeted for completion by 2021.
According to Australia’s Institute for Mergers, Acquisitions and Alliances (IMAA), Singaporean investors wrapped up 86 M&A deals in Vietnam between 2007 and 2017 with the total value of $1.86 billion.
Yeu Huan Lai, senior portfolio manager at Nikko Asset Management, said that Singaporean financiers are eyeing local companies which benefit from Vietnam’s rising affluent class and stronger demand for consumption. Besides real estate development, capital flowing from Singapore will channel into Vietnam’s consumer sectors such as food and beverages, tourism, consumer finance, retail, and energy.
Interest expands to SMEs
Lim of SBG noted that due to the impact of the CPTTP, the trend of Singaporean investment to Vietnam has recently expanded from large business groups to small- and medium-sized enterprises (SMEs).
“Along with large corporations, there are also SMEs flocking into Vietnam. The main reason is that the government of Singapore is pushing SMEs to go abroad to fund new ventures,” Lim cited.
When all of these SMEs look around neighbouring countries, Vietnam emerges as one of the most promising investment destinations. Most of the SMEs are specialised in the service industry such as in supply chains, and legal and accounting services. In addition, some SMEs are also bringing Singaporean cuisine to Vietnam by opening franchise restaurants here, Lim added.
According to HSBC Singapore’s latest report, the most significant kickers of the CPTPP will be the liberalisation of service sectors and the staving off of cross-border data restrictions, two significant commercial pain points for SMEs, which make up around half of Singapore’s economy.
Furthermore, Singaporean investment is further expected in Vietnam’s technology and e-commerce sectors. Singapore-based Grab is ramping up expansion efforts in the market beyond ride-hailing. Meanwhile, Singapore’s e-commerce platform Shopee is stepping up its operations in Vietnam to capitalise on the lucrative market.
“Vietnam has all the ingredients for a thriving e-commerce economy thanks to a young population, and growing Internet and smartphone adoption. In particular, the younger generation of Vietnamese is tech-savvy so shopping online has become a daily norm,” said Lim.
A separate HSBC report showed that overall investment into the ASEAN region until 2020 is expected to rise amongst Singaporean-based companies, with Vietnam to be a key beneficiary.
Winfield Wong, country head of Wholesale Banking at HSBC Vietnam said, “Whilst Vietnam’s growing consumer base is already well recognised by Singaporean companies, the report shows that many Singaporean companies are looking to double down on the demographic dividend.”
“Beyond this, Vietnam’s manufacturing sector is now entering a higher-end space. So while many corporations may base their treasury and other back-office functions in Singapore, a lot of revenue-making operations are being driven into Vietnam. This is only expected to ramp up with the country’s widening along the supply and value chain,” he added.