Vietnam on radar screen of global business majors

Vietnam has allured interest of many multinational companies in the first months of the year as its economic recovery gains momentum.

Danish toymaker Lego on March 19 received an investment certificate for its $1.32 billion project in Binh Duong province, which neighbors Ho Chi Minh City. The 44ha factory, with solar energy generation included, is the group’s first carbon neutral plant worldwide

Lego said the facility will create up to 4,000 jobs over the next 15 years. It chose Vietnam because it wants to cater to rising demand in Asia and strengthen its supply chain. The group currently has manufacturing locations in China, Denmark, Czech, Hungary and Mexico. The new factory will be the group’s sixth manufacturing site and second in Asia. It is being built to support additional long-term growth in the region, where Lego has achieved annual double digit growth since 2019.

One month earlier, in February, property consultancy Knight Frank launched a new subsidiary in the country - Knight Frank Vietnam Property Services – to provide brokerage for office, industrial and logistics property, capital markets and investment property, consultancy and research, among other services.

"Vietnam’s key position in global supply chains has helped propel local service industries, leading to industrial land prices rising by an average of 8% per year and the fast-growing office market maintaining around 90% occupancy in HCMC and Hanoi,” the London-headquartered firm said in a statement.

The country’s real estate market is experiencing rapid growth with substantial foreign investment inflows despite the pandemic, it added.

Taiwan’s largest logistics real estate developer, Ally Logistic Property (ALP), plans to enter the Vietnamese market this year after making a $1 billion investment to develop smart warehousing solutions in Malaysia.

ALP is revving up expansion plans across Southeast Asia, with Malaysia and Vietnam as its primary target countries. The region’s internet economy is primarily underpinned by its e-commerce sector, which recorded a 49% increase in gross merchandise value (GMV) last year, to $117 billion from $74 billion, according to a report by Google, Temasek and Bain & Company.

Temasek Holdings is currently among the investors in a $2 billion funding round by Asian logistics company J&T Express. The funding round will support the expansion of the company’s global delivery network and cross-border businesses.

Founded in 2015, J&T Express provides express services and transnational logistics for a network covering 10 countries including China, Indonesia, Vietnam, and Singapore. In Vietnam, the firm has been making non-stop expansions and is building its 37th transshipment hub on a 6ha site, set to be ready for operation in the coming weeks.

Alibaba Group’s logistics arm Cainiao is another major investor in the Vietnamese logistics industry. In February, it announced its new Cainiao PAT Logistics Park in Long An province’s Ben Luc district, less than an hour’s drive from HCMC, will begin operations in the first half of 2022.

Cainiao said the launch of the 110,000sqm warehousing leasing space comes as the country sees a surge in demand for local goods and a growing need for warehousing facilities.

These days, Singapore’s YCH Group and Vietnam’s T&T Group are co-developing a $200 million logistics hub, Vietnam SuperPort, near Hanoi. It is the first project under the Asean Smart Logistics Network, launched in November 2020 to support the Asean Connectivity Master Plan 2025. The World Bank’s investment arm IFC is supporting the project development.

Another Singaporean company, CapitaLand Development (CLD), part of Temasek-backed CapitaLand Group, is acquiring a prime site for its first large-scale residential project in Vietnam, with a projected total gross development value of approximately S$1.12 billion (US$828 million). The 20ha site is located in Binh Duong New City, about 45 minutes’ drive from HCMC. The seller is Binh Duong province-based Becamex IDC, a leading developer of industrial, urban and transport infrastructure in Vietnam.

According to CLD, the site will be developed into a prime large-scale residential project with over 3,700 freehold residential units across a mix of low-mid- and high-rise residential developments, providing homes for about 13,000 residents. The project is expected to be launched in phases, and construction of the first phase, consisting of about 1,300 landed houses and apartments, will start this year and is expected to complete in 2024. The rest of the project is scheduled for completion in 2027.

Banking on stellar economic recovery

Vietnam’s export-driven economy expanded 5.03% year-on-year in the first quarter, with signals indicating it is well on track for recovery, the General Statistics Office (GSO) said. The economy grew 4.72% in Q1/2021 and 3.66% in Q1/2020.

ADB on Wednesday stated that it anticipated Vietnam’s growth rate to converge to its pre-pandemic level of 6.5% in 2022 and 6.7% in 2023, the highest in Southeast Asia for both years.

Louis Nguyen, Chairman and CEO of Saigon Asset Management (SAM), said leading investment funds in Vietnam will continue to seek opportunities in the market, one of Asia’s fastest-growing economies.

“In the long term, the country continues to be one of the world’s fastest-growing economies, averaging 6-7% annually. By and large, the Vietnamese population is young and they have a lot of time to work, live, and to shop,” he told a financial talkshow on Vietnam Television in late March.

“Vietnam is located at a very good location for global logistics networks. The country also has necessary materials for manufacturing. As for me, the most important issue is the market has to ensure transparency and integrity for investors.”

In the first three months of this year, registered additional capital of foreign-invested companies in Vietnam and foreign capital contributed to acquire stakes recorded robust growth year-on-year.

Data from the Foreign Investment Agency shows that 228 FDI companies had their investment capital expanded by over $4.06 billion in total, up 41.6% and 93.3% respectively against the same period last year.