Asian investors leaning towards going greener across Vietnam

Asian investors are leading foreign investment inflows into Vietnam, with the trend towards a greener transition.

In late April, Taiwan-based Quanta Group signed an agreement with Nam Dinh Industrial Park Management Board and Dai Phong Infrastructure Construction JSC to develop a computer manufacturing project in Vietnam’s northern province of Nam Dinh, making it the company’s ninth factory globally.

Chairman of the provincial People’s Committee Pham Dinh Nghi said, “Nam Dinh will create the best possible conditions to support investors in dealing legal procedures during the construction and operation process.”

Also late last month, Malaysian group Petmal Oil Holdings proposed an oil refinery in the central province of Phu Yen worth $2 billion and spanning 500 hectares.

CEO Dato Paduka Affendi expressed his interest in the initiative. “When the project is put into operation, it will contribute to the provincial budget and create jobs for workers,” he said.

The refinery would be aligned with the province’s foreign investment strategy, which focuses on projects with high technology.

The first months of this year also witnessed new investment commitments from South Korean businesses. At a green growth promotion conference in Vietnam, a representative of SK Group said that they were considering making a big investment in Vietnam through a project to produce hydrogen gas.

Elsewhere, Seoul-based proptech startup Rsquare attended a high-tech investment promotion conference in

Danang in April to learn about opportunities in Vietnam.

Similar actions were taken in March when South Korea’s SEP expressed their plan to invest more than $200 million in the first carbon-neutral industrial complex for the shoe industry, and carbon reduction infrastructure in Vietnam in the southern province of Binh Duong.

About 20 member enterprises of SEP will participate and invest in carbon-neutral solutions. This project is expected to contribute to reducing greenhouse gas emissions and protecting the environment.

According to the Korea Trade-Investment Promotion Agency (Kotra), some key trade and investment trends relevant to Vietnam include the country’s vast infrastructure needs, energy, and telecommunications infrastructure, as well as renewable energy.

Lee Jong Seob, president of Kotra in Southeast Asia and Oceania, told VIR, “There is a growing demand for sustainable products and services, driven by concerns about climate change and social responsibility. Vietnam has a robust manufacturing industry that might be used to generate sustainable products. Regulatory frameworks and the ability to access green financing may hinder this trend.”

Japanese firms have also joined the investment trend. They attended the Vietnam-Japan investment conference in the northern port city of Haiphong to seek business and investment opportunities.

At a recent meeting with Vietnamese Minister of Planning and Investment Nguyen Chi Dung, Takeo Nakajima, chief representative of the Japan External Trade Organization (JETRO) in Hanoi, stated that Vietnam was an investment destination that Japanese businesses “cannot ignore.”

He mentioned new projects by Japanese firms in Vietnam, including a trade centre by AEON and a research and development centre in Danang by Fujikin.

In a JETRO survey of more than 3,000 Japanese companies conducted at the end of 2022, Vietnam was ranked second worldwide as a country in which to expand business in the future. The United States and China ranked first and third, respectively.

The manufacturing industry will likely accelerate its trend from manufacturing general-purpose products to high- value-added products and sales functions, according to JETRO.

“The move to transfer some of the items manufactured in China and Japan to Vietnam has been increasing. In addition, according to our survey, the number of respondents who want to increase local procurement to strengthen supply chains and lower costs exceeded the ASEAN average by 12 points,” Nakajima said.

In the non-manufacturing sector, respondents who will strengthen domestic sales increased by nine points over last year, reflecting the expectation of economic recovery after the pandemic and the expectation of medium- to long-term market growth, he added.

“Green will be one of the keywords driving Vietnam’s economic growth in the future. Japanese companies have excellent energy-saving and environmental equipment and services and a proven renewable energy track record. Smart city development is also expected to progress throughout Vietnam.”

Nakajima said that another promising space was Vietnam and Japan’s co-creation. Digitalisation will strengthen ties between Japanese companies and Vietnamese startups, and between Japanese startups and Vietnamese firms to expand into the Vietnamese market and third-country markets. Last year alone, collaboration occurred with Japanese company Gakken and Vietnamese companies Kiddihub, Denso, and Salex Motors.

Singaporean investors have also joined the wave. CapitaLand Group, at a meeting with leaders of the southern province of Binh Duong in mid-March, sought support of the local government for its project.

Chairman Wong Kan Seng said, “In Vietnam, besides developing housing complex projects in Ho Chi Minh City and Hanoi, CapitaLand is currently expanding its investment to neighbouring localities, including Binh Duong, a dynamic developing locality.”

According to the Ministry of Planning and Investment, Vietnam attracted $8.9 billion worth of foreign investment in the January-April 20, 2023 period. About 750 new projects were licensed during the period with a total registered capital of over $4.1 billion, up 65.2 per cent in the number of projects from the same period last year.

Asian investors, such as those from Singapore, Japan, China, Taiwan, Hong Kong, and South Korea, continued to lead the list, making up three-quarters of Vietnam’s total foreign investments in this timeframe, with Singapore coming in first and South Korea second.

Vietnam Investment Review