Transportation Costs and Risk Exposure

Foreign investors who are licensed to invest in the food sector in Ho Chi Minh City are in the process of implementing the project, while other projects are interested by foreign partners. It shows the excitement of investors when deciding to set up business in Vietnam.

In particular, project of Nam Duong International Food Co., Ltd with registered capital of 25.6 million USD has completed the construction of the factory, installation of equipment and machinery. The project is licensed by the end of 2015, which is a joint venture between the Saigon Co-operative Alliance (Saigon Co.op) and Wilmar International Limited (Singapore), with the capital contribution of 49% and 51% respectively. The project aims to produce sauces and spices for domestic and export markets.

Wilmar’s investment in Vietnam and cooperation with Saigon Co.op is to utilize strengths from both sides to improve the competitiveness and coverage of Nam Duong brand as well as contribute significantly to the development of the sauce and spices industry.

Meanwhile, the project of CJ Cau Tre Foods Joint Stock Company, with investment capital of 53.3 million USD, which was licensed by the end of May 2017, is being expedited by investors to implement the procedures under regulations to prepare to start construction.

This is a food processing complex on an area of 7.1 ha, including food processing plant, research and development center, modern food safety center… The 1st phase of the factory has designed capacity of 12,000 tons of products per year, which will be consumed domestically and exported to markets such as Korea, Japan, USA, EU…

The project is invested by CJ Cheiljedang Corporation (Korea) through the ownership of 71.6% stake in Cau Tre Export Processing Joint Stock Company.

We can see that, in recent times, many foreign investors have approached the market by acquiring or holding controlling shares in local companies and it is forecasted that this trend will continue.

In terms of attracting investment in the coming time, Ho Chi Minh City has many incentive policies for projects in 4 key industries, which are food processing, chemicals – rubber, mechanical and electronic – information technology. The field of food processing has received a lot of attention from many foreign investors and the fact that many large-scale investment projects have been licensed.

When Vietnam joins the TPP, Vietnam logistics industry has many opportunities to develop and engage more deeply into the world’s logistics centers…

According to the report of World Bank, the forecasted growth rate between 2015 and 2020 is 12%/year and import export turnover reached 623 billion USD in 2020, Vietnam is a promising destination for investors.

      

According to the statistics from the Vietnam Logistics Business Association (VLA), Vietnam’s logistics costs accounted for about 25% of GDP per year, much higher than countries such as the US, China or Thailand.

In the coming time when TPP agreement takes effect with many tariffs equal 0%, the export-import operations in Vietnam will promise to develop strongly. This is considered a great opportunity for the logistics industry to “boom”.

As an important link of the economy, the logistics activities help the goods to reach consumers and ensure the materials for the production process.

Despite facing strong competition from foreign rivals, many experts still appreciate the future prospects of the domestic logistics enterprises, especially in the context of free trade agreements (FTAs, TPP) boosted FDI inflows pouring into Vietnam industries.

On the other hand, the increasingly improved infrastructure in Vietnam will strengthen connectivity between logistics facilities and production areas; planning and supporting from the State, along with customs procedures are gradually improving in a positive direction.

In the recent two years, a series of key infrastructure projects have been started and completed as Long Thanh – Dau Giay highway, Noi Bai – Lao Cai highway, Ha Noi – Hai Phong highway, Ben Luc – Long Thanh highway Highway 51 connecting industrial park with the ports and Soai Rap channel dredging works (in Hiep Phuoc port) and Thi Vai – Cai Mep channel…

In addition, the Government and the Ministry of Transport have launched a number of policies to guide, support and stimulate the sustainable development of the domestic logistics industry such as: policy to control road loading, preferential policies for Vietnam ships on domestic routes, the draft to establish port authorities to develop ports and port services, Decision No. 1037/QD-TTg on the port development plan till 2020…

Moreover, according to the General Department of Vietnam Customs, Vietnam is also actively developing and implementing the ASEAN Single Window mechanism. The implementation of this process will benefit the business community, including logistics businesses such as reducing the time taken for administrative procedures and also cost reduction.

However, in order to develop logistics industry, the State should build and complete the legal framework, standardized service processes, upgrading infrastructure and human resources for the field of logistics.

Government should also take measures to guide and promote logistics companies to link together, formed the company with strong capabilities, able to compete with foreign companies.

With the above subjective and objective elements, Vietnam’s logistics industry still have great potential to develop and first of all, they will have conditions to advance to move towards to same level with foreign logistics businesses in the region.

On the morning of July 22nd, 2020, the High-Level Forum on National Energy Development 2020 took place at the same time many investment signing activities among leading energy enterprises in Vietnam, the region and in the world, open up a strong and sustainable period of clean energy development in Vietnam.

At the forum, the signed projects include: gas power plant project in Ca Na – Ninh Thuan province, LNG Chan May gas power plant project in Chan May Economic Zone – Thua Thien Hue province, project wind power off La Gan – Binh Thuan province.

The most outstanding of which is the wind farm project off the coast of La Gan in Binh Thuan province with a total investment of up to 10 billion USD. Accordingly, Copenhagen Infrastructure Partners (CIP), on behalf of New Market Fund I, with Asiapetro and Novasia Energy signed a Memorandum of Understanding (MOU) with the People’s Committee of Binh Thuan Province on the development of the offshore wind power project La Gan, Binh Thuan province. With a capital up to USD 10 billion, the pharmaceutical project is expected to create significant sources of income and employment for Binh Thuan and Vietnam, promoting the potential of developing wind energy in Vietnam.

For the LNG Chan May gas power plant project (in Thua Thien-Hue province) with a total investment of about USD 6 billion, cooperation between the US and Vietnam. When operating, every year, the plant will provide an average power output of 24 to 25kWh. Accompanying with the project are the US Government’s support programs for private investment projects of US citizens abroad, along with the world’s leading partners in finance, technology, operation and gas supply (source guaranteed from the United States) and corporate governance: US Development Finance Corporation, USAsia EDGE, World Bank, US EXIM Bank, GE Gas Power … help contribute to the growth of trade relations between Vietnam and America.

Besides foreign investors, domestic investors are also interested in developing clean energy such as gas power project in Ca Na and Phu My solar power development project in Binh Dinh with investment capital more than 6,000 billion.

With the development of clean energy projects, Vietnam expects many domestic and international investors to invest in the field of clean energy, set up company, obtain investment licenses, or acquire other company through merger and acquisition, bring in fresh capital in order to fully realize Vietnam’s capabilities in this field and bring great economic benefits to investors and contribute to environmental protection, sustainable clean energy development in the future.

In the period of many countries in the world and in the region competing for attracting FDI, especially when the wave of diversification of supply chains after the Covid-19 epidemic is growing sharply, Vietnam is considered to be one of the countries with the most FDI attraction in Southeast Asia for investors to set up company.

Vietnam is a Southeast Asian country with a fast-growing economy, stable politics, young population, abundant labor costs and competitive costs compared to other countries in the region. Besides other names such as Thailand, Singapore, Philippines, Indonesia, Malaysia, each country has a different advantage to attract FDI enterprises from Japan, Korea, EU, USA, etc. However, Vietnam is still the expected destination of many investors.

As a landlocked nation with an extensive international port system throughout the country, Vietnam has a superior position in trading and exchanging goods with other countries. With the investment in infrastructure, the development of international seaports and airports, Vietnam is gradually becoming a destination for international investors. In addition, Vietnam’s infrastructure develops relatively evenly across regions, not so different between regions, so investors can freely choose the right investment location for themselves.

Vietnam is a country with a young population in Southeast Asia, a country with the lowest labor costs in Southeast Asia, the labor force in Vietnam is fully trained in many different fields. Not only that, workers in Vietnam are gradually improving their foreign language skills, so that they can meet the needs of international investors, which will make it easier for investors to find the suitable human resources. The human resources in Vietnam not only help businesses invest in Vietnam but also qualified to implement projects of investors in many other countries.

In addition, Vietnam is a politically stable country in the region and investors can be assured of making investments in Vietnam. Along with that, Vietnamese culture has many similarities with Japan and Korea, many investors can make investments without worrying about the cultural differences that will affect the project implementation.

At a time when the cost of doing business in other countries in the region is increasing, the demand for investment movement out of China of international investors is growing strongly, Vietnam needs to seize opportunities, improve infrastructure, create policy clearance, helping investors to attract maximum quality FDI investors to invest, set up company, obtain investment registration certificate and business certificate, transfer in investment capital, hire local people helping create the economic recovery process and business development in Vietnam.

On December 29th, 2020, representatives of Vietnam and the United Kingdom signed the free trade agreement negotiation between the Socialist Republic of Vietnam and the United Kingdom of Great Britain and Northern Ireland (UKVFTA) in London, United Kingdom. It would open up opportunities for flow of goods and that investors from UK to make investment in Vietnam through setting up company, and manufacturing facilities.     

After December 31st, 2020, the Vietnam – EU free trade agreement (EVFTA) will no longer apply to the UK due to Brexit, so the implementation of the signing of a free trade agreement between the two countries is essential to sustaining and developing economic cooperation. The UKVFTA is expected to help reduce import duties on goods from the UK to Vietnam and vice versa. In addition, the commitments in the Agreement will help develop trade and investment between the two countries in the coming time.

In recent years, the UK is a major trading partner of Vietnam in Europe, the import-export turnover between the two countries has increased significantly, especially products of seafood, garments, wood products, agricultural products etc. Besides opportunities to promote exports, improve business investment environment, expand commodity supply, the UKVFTA also poses certain challenges in meeting the quality of goods to qualify for pressure tax incentives in the Agreement.

In order to make the most of the economic effects from the UKVFTA, there are UK investors to invest and produce products that meet the quality and demand conditions for the UK market is essential for Vietnam. Besides, in addition, the advantages of British investors such as finance, pharmaceuticals, chemicals…will benefit Vietnam. Investing in Vietnam in this industries will enable investors to take advantage of highly skilled labor, perfect facilities as well as investment attraction policies in Vietnam to bring the best benefits for investors. On that basis, Vietnam also learn the operations, management and experience from British investors, thereby helping to develop the domestic market. In addition, Vietnam also needs to import raw materials for UK manufacturing industries such as textile materials and leather to ensure compliance with the rules of origin in order to make the best use of incentives from the Agreement.

With the negotiation of the Agreement, this is a new beginning for the economic relationship between the two countries Vietnam and the UK during a period of many difficulties due to epidemics and economic crisis. In addition, this is a step towards further developing the diplomatic, cultural and educational relationship between the two countries in the future.

Over the past 10 years, Vietnam has always been one of the leading M&A destinations in Southeast Asia. Many international investors have chosen Vietnam as their place of business destination to set up company and apply for investment registration certificate under direct investment or acquiring shares or capital contributions through M&A.

M&A activities enable international businesses to take advantage of the existing business platforms of Vietnamese businesses to continue making investments. This helps international investors to timely grasp the changing trend of technology, legal policies, and facilities to do business, instead of rebuilding from scratch, it will take more time and effort.

Recently, the M&A market in Vietnam has been active and attractive to many investors around the world, especially in the retail and financial sectors. Many international investors have undertaken significant M&A deals in Vietnam over the years and achieved significant profits in their business.

There are many reasons for investors to choose Vietnam as a place to do business, but some of the main factors that make Vietnam attractive are political stability and its economic growth, despite the effects of the Covid-19 epidemic. In addition, with a population of 100 million people, this is considered a large consumption market, along with an abundant and high-quality labour source.

Currently, with the trend of moving production out of China, many investors have chosen Vietnam as the location of setting up company for manufacturing facilities. Rebuilding factories from scratch also makes investors time consuming and costly, therefore taking advantage of Vietnamese factories will help investors not to interrupt their production, and operate the business in a best way.

However, to be able to perform M&A activities in Vietnam, foreign businesses need to understand the Vietnamese market and partners before performing M&A. This will help investors understand the partners’ strengths and weaknesses, and outline a suitable business path after implementing M&A. In addition, to avoid unnecessary risks relating to the transaction and to the business itself, investors need to find a reputable and experienced professional consulting company that could help with market research, background check, management criminal record check, business certificate verification, corporate and individual reputation to build up confidence in doing M&A deal in Vietnam.