Ho Chi Minh City Attracted USD 1.92 Billion of FDI

Ho Chi Minh City is one of the major economic, political and cultural centers of Vietnam as it has many favorable conditions for development. That’s why many foreign investors chooose to set up company in Ho Chi Minh city.

In the first 4 months of 2018, the total registered capital of new, increased, and contributed capital, purchase of shares of foreign investors in Ho Chi Minh City was 1.92 billion USD, accounting for 23.8% of the total investment capital of the whole country.

According to the Foreign Investment Department – Ministry of Planning and Investment, from the beginning of the year until now, foreign direct investment (FDI) projects have disbursed 5.1 billion USD, increase by 6.3% over the same period in 2017.

The whole country has 883 new projects have just been granted investment certificate with a total registered capital of 3.55 billion USD, equaling 76.1% over the same period in 2017. There are 303 projects registering to adjust investment capital with total increasing registered capital of 2.24 billion USD, equivalent to 51.5% compared with the same period in 2017.

In terms of investment sector, in the past four months, foreign investors have invested in 17 industries, of which the processing and manufacturing sectors are still attracting more attention of foreign investors with total capital of 4.52 billion USD, accounting for 56.1% of total registered capital. The real estate business ranked second with a total investment capital of 807.5 million USD, accounting for 10% of total registered capital. The third was the wholesale and retail sector with total registered capital of 779 million USD, accounting for 9.7% of total registered capital.

In terms of investment partners, there are 82 countries and territories have investment projects in Vietnam, of which Korea ranks first with total investment of 2.32 billion USD, accounting for 28.7% of total capital. Japan ranks second with total registered capital of approximately 1.29 billion USD, accounting for 16% of total investment. Singapore ranks third with total registered capital of 808 million USD, accounting for 10% of total investment.

Ho Chi Minh City continues to attract the most capital with a total registered capital of 1.92 billion USD, accounting for 23.8% of total investment. Hai Phong ranks second with a total registered capital of 1.03 billion USD, accounting for 12.8% of total investment. Hanoi ranks third with a total registered capital of 746 million USD, accounting for 9.25% of total investment.

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Medical Heathcare Industry

The demand for medical equipment in Vietnam has been increasing due to the need to for treatment for cancer, heart disease, injuries, with focus on imaging equipment, operation room, emergencies resuscitation, intensive testing. The reason behind is the rising income and awareness of treatment for better quality of life. The foreign companies also tend to seek market entry solutions from independent consultant or local partners whom will be distributing the products into Vietnam to maximize the success chance.

In 2012, the size of medical equipment and supplies had been estimated by Ministry of Health at USD 515 m and the growth rate is between 10-11% per year.

However, the market development has been faster than anticipated. In 2016, total investment in medical equipment in Vietnam was USD 950 million USD. By 2017, this figure increased to USD 1.1 bil and that growth rate has been 18% over the past 5 years.

It has been reported 90% of equipment and supplies are imported from Japan, Germany, USA, China and Singapore, the 3 leading countries are United States, Germany and Japan. The imported imaging equipment such as magnetic resonators, CT machines, ultrasound machines, x-ray machines accounted for 30% of the import volume.

The Ministry of Health has policy to improve the capacity of medical equipment production in Vietnam over the last 20 years ago but the success is limited. Currently, there are about 50 domestic enterprises, but mainly produce medical bed and cabinet. The more advanced machines are being assembled by enterprise that cooperate with Japanese and Korean partners.

It has been evaluated that medical equipment is one of four attractive sectors for foreign investors when targeting Vietnam, in addition to investment in electronics, IT and communication and textiles. Public hospitals, which account for 70% of the market share, are still the largest customers of these manufacturers. The remaining other customer groups include foreign invested hospitals, private hospitals and research institutes, universities.

Government investment capital will continue to play an important role and public hospitals will tend to be more self-reliant in seeking financing for medical equipment investments.

For foreign companies entering Vietnam for supplying medical equipment, they have to follow strict process for bidding for public service. It is important for the foreign medical equipment to follow the Vietnam law and undertake regulatory investigation and research on medical equipment there are different implications for the import, sales and distribution into Vietnam.

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Wind Power in Vietnam Attracts the Attention of Foreign Investors

Tra Vinh People’s Committee has approved the policy for three investors to implement the Hiep Thanh wind power plant project in the province with a total investment of nearly 3,370 billion VND; of which 20% is contributed by investors, the rest is loan from bank Landesbank Baden-Wurttembrg-LBBW, Germany. It shows that Vietnam wind power sector is attracting attention of foreign investors.

The Hiep Thanh wind power plant project will be built on a total area of 2,747 ha in the coastal alluvial land of Hiep Thanh commune, Duyen Hai town (Tra Vinh province) with the design capacity of 78MW, with 18 – 19 wind turbine columns.

Investors implementing the project include Ecotech Vietnam Renewable Energy Joint Stock Company (based in Hai Ba Trung District, Hanoi); Janakuasa Pte LTD (Singapore) and Mr Lam Minh (Ba Dinh District, Hanoi). Investors have established Ecotech Tra Vinh Renewable Energy JSC to carry out the project. The duration of the project is 49 years.

According to General Director of Tra Vinh Ecotech Renewable Energy Joint Stock Company, the project was included in the Power Development Plan for Tra Vinh province in the period 2016 – 2025, with a view to 2035, which was approved by the Ministry of Industry and Trade on May 19th 2016. Currently the project is implementing investment procedures with the aim of putting into operation in the first quarter of 2020.

Sharing about the wind power price, according to leader of Tra Vinh Ecotech Renewable Energy JSC, the price of wind power is currently approved by the Prime Minister under Decision 37/2011/QD-TTg on the mechanism to support the development of wind power projects in Vietnam and take effect from August 20th 2011 is 7.8 cents/kWh.

According to leader of Tra Vinh Ecotech Renewable Energy JSC, Vietnam is the most potential country in ASEAN in recent years and coming years.

However, with the electricity price of 7.8 cents/kWh in this project, it is difficult to arrange capital, but the company is willing to bet on the project because they believe in the development of the Vietnam economy and want to contribute to the development of power plants in Vietnam. Investors also believe that the Government of Vietnam will study and reconsider bring the price of wind power to a more harmonious level, ensuring equality between renewable energy sources.

Hiep Thanh wind power plant is the fourth wind power project which was granted investment policy in Tra Vinh province. Previously, Tra Vinh province has granted investment certificates for 3 wind power projects, with a total designed capacity of 192 MW, in Truong Long Hoa commune (Duyen Hai town) and Dong Hai commune (Duyen Hai district).

These projects are in the stage of implementing appraisal procedures, approving the basic design… to start the construction. These projects are also in the list of projects calling for investment of Tra Vinh province in the period 2016 – 2020.

According to Tra Vinh wind power development plan up to 2020, with a view to 2030, which was approved by the Ministry of Industry and Trade on December 4th 2015, Tra Vinh province has planned 6 wind power projects at 6 coastal mudflats of Duyen Hai district and Duyen Hai town; in which there are 3 plants in Truong Long Hoa commune, 2 plants in Hiep Thanh commune and 1 plant in Dong Hai commune.

By 2020, the total installed capacity is about 270MW, the corresponding wind power is 634 million kWh. By 2030, the installed capacity will be about 1,338 MW. Total investment for wind power grid connected projects by 2020 is about 14,313 billion VND.

The wind power development projects will bring many benefits to the socio-economic development of Tra Vinh province such as increasing the local budget from taxes, increasing the electricity supply to create jobs for local workers; create landscapes to attract tourists.

In order to implement Vietnam’s national energy development strategy up to 2020 with a vision to 2050 (promulgated together with Decision No. 1855/QD-TTg, December 27th 2007), Vietnam strives to increase the ratio of new and renewable energy sources to around 5% of primary commercial energy by 2020 and about 11% by 2050.

According to Decision No 1208/QD-TTg dated July 21st 2011 of the Prime Minister on the approval of the Power Plan VII will bring the total wind power capacity from current level to about 1,000 MW in 2020 and around 6,200 MW by 2030. Electricity produced from wind power accounts for 0.7% in 2020 to 2.4% in 2030.

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Risk Management Necessity in Vietnam?

As Vietnam further integrates into the world business, more investors are eyeing Vietnam for investment. As part of investment due diligence, risk management are always well considered before foreign investors decide to do business with Vietnam partners.

In any parts of the world inluding Vietnam, risk is an inevitable factor in business operation activities; higher return is always accompanied by higher risks. Coping and managing risk is an integral part of any business in order to make profit and create value to shareholders in import export transaction, investment, or merger and acquisition activities in Vietnam.

However, in our daily consulting practice, we have seen a number of businesses whom do not manage risk effectively and furthermore not fully understand about the risks that they are facing.

Typical risks in developing countries like Vietnam are political risks, policy risks, regulations risks, credit risks, bribery and corruptions, and organized crimes.

On daily transaction in trading, according to Vietnam Ministry of Industry and Trade, there are situations a number of corporate scams between Vietnam and foreign enterprises are reported. In particular, foreign companies sell goods or provide services to partners in Vietnam and in return the Vietnam partner fail to pay.

On a larger scale in FDI through business formation or M&A origination and execution, businesses that do not improve the risk management process will have to face with a lot of different types of risks: serious financial losses, adversely affecting cash flows and the value of shares, decreasing prestige with customers, employees and investors.

Many business leaders often put heavy emphasis on the business activity, profit, and revenues instead of concentrating more on risk management especially understading business partners through corporate intelligence investigation, background studying, adverse media search through professional consultants in Vietnam whom understand languages, cultures, legal environment and busieness practices. Further searches could help foreign investors to understand the company itself, owners, shareholders, members of board of directors of partner companies whom make daily decisions of the business.

In the period that global crisis has been predicted that almost bottom out and start to show signs of recovery, although the recovery process can occur with different speed and characteristics depending on sector and location of the business, the fully preparation of business in all aspects including process and risk management strategy could helps business not falling into the passive and also have more possibilities to take advantage of growth opportunities after the recession.

Recently in Vietnam with the impact of high inflation rate and economic recession caused by the global financial crisis, enterprises are increasingly concern about risk management activities. Many experts believe that an effective and well organized risk management system will help businesses withstand and overcome fluctuations.

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Cooperation between Vietnam and Japan After the Covid Epidemic

On May 15, 2020, the Minister of Planning and Investment met Ambassador Mr. Yamada Takio (Japan) on the occasion of starting his working term in Vietnam. The parties spent time welcoming and sharing a number of problems that need to be resolved to promote investment activities between the two countries in the context of the Covid-19 epidemic, including promoting public investment, promoting investment in the private sector, attracting investors to set up company, factory and implement investment into export processing zones in Vietnam.

The Ambassador said there are currently more than a thousand Japanese experts who wish to have work permit, investment visa, temporary residence card to go to Vietnam to restore business production. In addition, Japanese small and medium enterprises are very interested in the Vietnam market. Japan Government has provided 23.5 billion yen (USD 220 million) to encourage domestic enterprises to transfer production activities to Southeast Asian countries, including Vietnam, which is an opportunity for Vietnam to attract FDI to register investment project in setting up factory in Vietnam.

Following the the investment shift after the US-China Trade war (2019) and the Covid-19 epidemic, many Japanese investors intend to withdraw from China to invest in Vietnam to set up factory, and company and form a new supply chain. Accordingly, Vietnam will have a plan to create a working group to attract Japanese enterprises to invest in the fields and provinces that Vietnam wishes to contribute more to the socio-economic development of Vietnam. In 2019, Japan is the fourth-largest FDI country in Vietnam, the second largest investment partner in Vietnam implementing the project, with a total investment of USD 59.3 billion.

With its advantages and experience, Japanese investors are investing in Vietnam in the fields of professional science, technology, information technology, wholesale, retail, engineering and real estate. These industries are the advantages of Japanese investors when investing in Vietnam, which it not only brings benefits to investors but also helps Vietnam to learn management experience and operation from Japan, helping Vietnam to apply to develop the domestic economy.

The Vietnamese representative emphasized the importance to attract Japanese enterprises to invest smoothly and successfully in Vietnam, including large and small and medium-sized enterprises to contribute more to the socio-economic development of Vietnam. At the same time, the Ministry of Planning and Investment continued to work closely with the Embassy as well as with the Ambassador’s individual to bring closer cooperation between the two countries.

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Solar Energy Power Future in Vietnam

Although the initial investment cost for solar energy in Vietnam is high but it brings in opportunities for cheaper option than thermal power technology being used in Vietnam.

In other country, solar power plants are competing fiercely with the thermal power plants running on coal.

Energy consultant in Vietnam

Energy and resources lawyers in Vietnam

In Vietnam, Thien Tan solar energy plant has been started to construct on 24 ha land in Quang Ngai with capacity of 19.2 MW at investment of VND 800 bil. The Ministry of Industry and Trade has also approved the investment project of Tuy Phong solar energy plant on 50 ha land in Binh Thuan with capacity of 30 MW at investment of VND 1,454 bil. This will open opportunities for renewable energy to contribute to the effort of protecting the environment and curbing climate change.

The solar energy is new in Vietnam therefore the investment in this area is at very early stage. However, the foreign investors have been increasingly interested in seeking opportunities in investment in solar energy projects.

Similar to investment in wind power energy in Vietnam, one of the concerns for investors is the expected increase in purchasing price from Electricity Vietnam Corporation, the party whom purchase the electricity on Power Purchase Agreement (PPA). Further, legal frameworks for promoting solar energy investment are not yet finalized. Accordingly, the contribution ratio of renewable energy in Vietnam is minimal. The Vietnam government has been trying to put some effort to increase the renewable energy contribution to 5,6% (in 2020) and 9,4% (2030).

To achieve this, Vietnam government shall need to be consulted on plan to support the solar energy investment project in Vietnam in tax, land, capital, power purchase agreement. Investors would need to be consulted by local consulting firm on process, procedures on investment policy, appraisal process, power purchase agreement, and other steps to develop and execute an energy project in Vietnam to improve the effectiveness of the investment in renewable energy.

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