Friday, 15 April 2016

Vietnam to be a favorite destination for Thailand investors

Since Vietnam has become a full member of ASEAN in 1995, positive results in trade and investment relations between Vietnam and Thailand have been observed. Particularly, the two countries upgraded their relationship to a strategic partnership, on the occasion of the General Secretary H.E. Mr. Nguyen Phu Trong’s official visit to Thailand in 2013, meaning that Thailand attached much importance to its relations with Vietnam. Later in 2014, on the occasion of Thai Prime Minister Prayut Chan-o-cha’s official visit to Vietnam, the two sides signed the Action Program to implement the Vietnam-Thailand Strategic Partnership during the period from 2014 to 2018.

Over the past years, the two-way trade turnover between Vietnam and Thailand has experienced fast growth. The turnover was valued at US$9.4 billion in 2013, 9.2 percent higher than 2012, and it reached US$10.6 billion in 2014, 12.5 percent higher than 2013. As of June 2015, Thailand with registered investment capital of US$6.8 billion has ranked 10th among the 101 investors in Vietnam. Thai firms mainly invest in machinery manufacture, food and forestry processing, construction, wholesale and retail networks, and machinery repair. Meanwhile, Vietnam has 7 investment projects in Thailand with total investment of US$11.35 million and the Vietnamese firms focus their investment on property, household goods, tourism and software.

Following The Nation - the most updated English news website of Thailand, there have been so far 2,000 Thai enterprises who wish to invest and did register with Thailand Embassy in Vietnam. Many small and medium Thai enterprises (SMEs) are developing their activities in Vietnam to obtain more shares in this potential market.

Although coming a bit later than Japanese and Korean investors but seeming to have more giant moves, Thailand companies are significantly penetrating Vietnam’s market by taking over existing business chains. Many recent signals showed that Thai groups are planning giant investment projects in Vietnam.

Saha Group, one of Thailand biggest manufacturers and traders of consumer products, is negotiating with its Japanese partner for joint expansion of its logistics and property ventures in Vietnam next year, reported Bangkok post. "We want to invest more abroad. For Vietnam, we're interested in logistics, property and wholesale," the executive said.

The Ton Poh Thailand Fund, a Bangkok based boutique fund management company, became major shareholder of Hoang Huy Investment Services (HHS) after buying more than 5.9 million shares on May 7, holding 5.32% stake after the deal. Moreover, this Fund, in March this year, had bought 2.5 million CTD shares, holding 5.92% stake and becoming the largest shareholder of CotecCons JSC.

Besides, the Bangkok-based Chairatchakarn, a Thai automobile enterprise which trades Toyota and Hino brand vehicles, bought 2 million shares of HCM City-based Truong Long Automobile, becoming a large shareholder of the Vietnamese automobile firm with 22.6 percent of shares.

Also, in early this year, Thai billionaire Charoen Sirivadhanabhakdi, who did spend nearly US$900 million to buy out German retailer’s Metro Cash-and-Carry in Vietnam, which is considered the biggest foreign-owned retailer in Vietnam and possesses 19 supermarkets nationwide, has confirmed his interest in bidding for 40% shares of Saigon Beer, Alcohol and Beverage Corporation (Sabeco), Vietnam’s largest beverage producer, with an offered price being 60% higher than the price on over-the-counter market.

It can be seen that Vietnamese market is attracting much attention from Thai funds and enterprises. Following Mr. Tussin Mahamongkol, vice chairman of the Thai Business Association in Vietnam, Thai products are quite appreciated by local customers. Therefore, it’s a good opportunity for Thai enterprises to enter and position in the market.

According to Bank of Thailand, investment from this country into Vietnam increased 11.8%, up to US$2.5 billion in 2014 - of which, investments in industry sector account for approximately US$112 million.

To explain why Vietnam is so attractive to Thai investors, many reasons have been mentioned including Vietnamese government’s preferential policies aiming to attract investment (foreign businesses could win tax waivers for four to nine years and though land ownership is prohibited, the lease period is as long as 50 years, etc.), a young and somewhat skilled labor force with thirst for knowledge, a growing domestic purchasing power and a convenient transport route to China, Japan, Oceania and the American west coast.

Warrick Cleine, chairman and chief executive of KPMG in Vietnam and Cambodia, said at a recent briefing in Bangkok that Vietnam could be a destination for investment in several areas including food, retail, high-value consumer goods, and condominium development.

He noted that Vietnam's young population was ready to purchase and spend. Young Vietnamese make frequent visits to supermarkets and demand good-quality consumer products. Condominiums are also in high demand in Hanoi, Ho Chi Minh City and Danang. "Vietnamese consumers show great excitement for foreign brands. Asian tastes are more suitable for them. It's happening right now. There is a very big opportunity to come," Cleine said.

In one hand, the arrival of big Thai investors to Vietnam can bring in their experience as well as good management skills and somehow benefit the local enterprises. In the other hand, the tough competition, which goes along with, will push these latter to improve their performance in order to avoid being losers in the domestic market.



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