Vietnam SMEs optimistic, eye overseas expansion: UOB

A whopping 90% of Vietnamese small and medium enterprises (SMEs) deem the current business environment positive and want to expand overseas for revenue growth, according to a report by Singapore-based United Overseas Bank (UOB).

Companies in industrials, oil and gas, as well as manufacturing and engineering are particularly interested in venturing abroad, says the UOB Business Outlook Study 2024 report launched Tuesday.

Citing a survey of 525 Vietnamese SMEs, the report says ASEAN is the most preferred expansion destination for local firms (70%), with Thailand catching their attention the most, followed by Singapore, Malaysia and Indonesia.

Trailing ASEAN is mainland China, selected by 37% of the respondents.

However, the SMEs are aware that venturing into international markets comes with its own set of challenges, including difficulties in customer acquisition (41%), legal and regulatory issues (39%), and search for partners (38%).

To venture overseas, Vietnamese SMEs expect financial support including tax incentives/rebates (42%), connections to large corporate businesses that are potential customers abroad (42%), funding or grants for new markets (40%), and connections to industry peers and ecosystem partners to learn from best practices (37%).

The report says Vietnamese businesses also faced several challenges in 2023, with nearly 40% affected by high inflation levels and more than 30% by fluctuating commodity prices and the overall economic slowdown.

Despite this, local firms are expecting a vastly improved performance in 2024 (40%). Business services (44%) and wholesale trade (43%) account for firms with the most positive outlook.

Key priorities for the next one to three years mentioned by Vietnamese companies include diversifying supply chains (31%), looking for new partnerships (30%), and reducing costs (30%).

Positive first half performance

Suan Teck Kin, UOB’s executive director of Global Economics and Markets Research, said at the launch of the report that Vietnam’s economy has significantly improved in the first half of 2024 with a GDP expansion of 6.42%, compared to 3.84% in the same period last year.

The recovery of both domestic and global demand as well as local manufacturing has helped the economy grow beyond expectations in the six-month period, Kin said.

Production grew for the fifth consecutive quarter at 10%, while services expanded for the 11th quarter in a row, respectively contributing 29% and 45%, to H1 GDP growth. Exports and imports grew 14% and 16.6%, respectively, and the nation posted a trade surplus of $11.3 billion.

Retail sales was stable and the tourism sector welcomed 8.8 million foreigners, compared to just 5.6 million in the same period last year.

Registered foreign direct investment (FDI) jumped 13.1% year-on-year to $15.2 billion in H1/2024. FDI disbursement rose to $10.8 billion, more than double the $4.6 billion recorded in Q1/2024. This followed a record high $23.2 billion in 2023, which surpassed the previous record of $22.4 billion in 2022.

Muted H2 outlook

The UOB report said that the economic outlook for H2/2024 remains rosy, driven by expected stable growth in China and the region as well as probable monetary loosening by central banks.

It also cautioned that the second half of this year could see a more muted performance, given the higher base in H2/2023 as well as downside risks still present, including the conflicts between Russia and Ukraine and in the Middle East, which could disrupt global trade and energy markets.