Is Mergers and Acquisitions (M&A) part of Foreign Direct Investment (FDI) and how significant it is to this capital pool? This article aims to dive into Vietnam’s FDI status in recent years and how M&A has becoming increasingly significant in its overall picture.
Vietnam – an inevitable destination
Despite global challenges such as geopolitical tensions, inflationary pressures, and elevated capital costs, ASEAN saw FDI inflows FDI inflows for the third consecutive year, with a record growth of 1.2%, reaching USD 226.3 billion in 2023.
Vietnam has emerged strongly as a resilient and attractive destination for FDI in the region, ranking third in ASEAN for FDI attraction during the 2019-6M2024 period, demonstrating its exceptional appeal to international investors. In 2023, actual disbursed FDI reached a record high of USD 23.2 billion, surpassing the previous peak of USD 22.4 billion in 2022. Notably, registered FDI in 2023 rose by 32%, reaching USD 36.6 billion compared to USD 27.7 billion in 2022, nearing the record level of USD 38 billion set in 2019. Vietnam’s FDI is also projected to achieve positive results this year, with disbursed FDI from the beginning of the year to June 2024 hitting USD 10.8 billion, more than doubling from USD 4.6 billion in Q1 2024. Registered FDI in the first six months of 2024 reached USD 15.2 billion, up by over 13% compared to the same period in 2023.
From 2019 to the first half of 2024, Vietnam attracted over USD 177 billion in FDI across more than 46,000 projects. The manufacturing and processing sector remained the largest recipient, accounting for 60% of total FDI, followed by real estate, energy, retail, and science and technology sectors.
TOP ATTRACTIVE SECTORS IN VIETNAM 2019-6M2024
FDI has Vietnam’s economic development, state budget, export turnover, and other crucial aspects. According to the Ministry of Planning and Investment, FDI contributes 20% to Vietnam’s GDP and around 15% to the state budget. Furthermore, FDI has also created numerous job opportunities for the Vietnamese workforce. Specifically, in 2011, the FDI sector provided jobs for 2.1 million workers (accounting for 4.2% of the total workforce), which increased to about 3.2 million workers (accounting for 6%) in 2015 and reached 4.59 million workers (accounting for 9.35%) in 2021, according to data from the State Bank of Vietnam.
In the period from 2019 to the first half of 2024, Singapore is a top FDI partner for Vietnam with a total investment of around USD42.7 billion, followed by South Korea (USD26.7 billion), and Japan (USD23.3 billion). However, it is worth noting that many investors from the US, the UK, China, and various countries from Europe, and the Middle East have invested in Vietnam through their subsidiaries, affiliates and entities from Singapore, Korea, and Japan.
TOP 10 FDI PARTNERS IN VIETNAM 2019-6M2024
The strong presence of investors from these countries not only brings substantial capital inflows but also helps Vietnam increase knowhow, expand business networks, and enhance the competitiveness of Vietnamese enterprises.
VIETNAM FDI BREAKDOWN 2017-6M2024
Notable increase of M&A activities in FDI in Vietnam
There has been a notable increase of M&A activities in FDI in Vietnam, highlighted by significant value of capital contributions and share purchases in 2018 and 2019. Since 2020 due to the negative impact of COVID, high USD interest rates, and other uncertainties, this contribution dropped drastically, however has rebounded since 2023 and is expected to increase.
South Korea has become a key player in this trend, with several notable deals during this period. For instance, Hanwha Asset Management invested USD 400 million in Masan Group, while SK Group acquired a 9.5% stake for USD470 million in 2018 and further invested an additional USD1 billion in Vingroup in 2019. In the same year, Hana Financial Group acquired a 15% stake in BIDV bank for approximately USD900 million. These transactions had marked a significant vibrancy in M&A activities in Vietnam during this period.
As the economy and business grows, M&A activities has also become more pivotal. M&A can be a resourceful growth strategy, allowing not just the economies but also businesses to be flexible, innovate, and enhance hidden values, optimize business valuation, and maintain or boost their market positioning.
Vietnam’s competitive advantages, including its strategic geographical location, political stability, consistent economic growth amidst global downturns, and active participation in numerous free trade agreements, are positioning it favorably for continued FDI inflows, where M&A activities have started playing an increasingly important role. More quality capital and M&A activities will be happening in Vietnam, supporting its economic development and enhancing the overall capabilities of international and domestic firms.
Authors
This article is written by Advisory team and has been peer reviewed (the “authors”). It is part of our Views and Analysis series, where colleagues from various disciplines, functions, and levels share their expertise, studies, observations, analysis, and views relevant to our work and clients.
Sources
The information, data and figures are from the State Bank of Vietnam, Ministry of Planning and Investment, and Federal Reserve Economic Data and the author’s analysis.
Disclaimers
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Where the article contains statements, estimates, and projections regarding the anticipated future performance of Vietnam, markets, companies, and related figures, such statements, estimates, and projections may or may not prove to be accurate. No representation or guarantee is made regarding the accuracy and completeness of the content presented.
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