Vietnam’s Consumption Boom Fuels Thai Investments

Tuan Minh

16:32 19/09/2016

BizLIVE - A large number of Thai businesses have come to Vietnam to capitalize on the rapidly-growing consumption amid a saturated market in their home country.

Vietnam’s Consumption Boom Fuels Thai Investments

With the acquisitions of Metro Cash & Carry Vietnam and Big C Vietnam, Thai players have wider presence in the local retail market. Photo:

Big Thai businesses have been ramping up both direct and indirect investments in Vietnam, which has a young population and fast-growing middle class, given a market saturation in their home country.
Rising Thai FDI Flows
As Vietnam is striving to improve the investment climate, business and tax barriers have been removed under free trade agreements to which the country is a party, a rising number of Thai investors are planning to expand their presence to Vietnam.
Vietnam is an extremely appealing market not only for Thai companies but also for businesses from other countries, said Thailand’s Minister of Commerce Apiradi Tantraporn at a forum in mid-June this year.
Hemaraj is looking to develop two industrial parks in the central province of Nghe An with a combined area of some 3,100 hectares. Meanwhile, RATCH Co., Ltd, has expressed interest in investing in energy projects, including the Hai Phong 3 thermal power project.
Industrial real estate developer Amata, which has been present in Vietnam for two decades, is set to invest $200 million in a second project in Dong Nai province, adjacent to the country’s economic hub Ho Chi Minh City.
Green Siam Marketing, TRI Global, Pharmaceutical Industry, CT Industry, NMB-Minebea Thai and Gates Unitta have seen opportunities in Vietnam and are considering expanding their operations here.
Foreign direct investment pledges by Thai investors reached $414 million in the first eight months of this year, enabling Thailand to become the second-largest investor in Vietnam among Southeast Asian countries, according to data of the Ministry of Planning and Investment.
Accumulative direct investment from Thailand has surged from $5.9 billion in 2012 to $9.44 billion as of July 2016.
Thai companies will continue to bolster investments in Vietnam in order to make Thailand among the ten largest investors here in the coming two to three years, Thai Minister of Foreign Affairs Don Pramudwinai said during a visit to Vietnam in July.
Thailand-Vietnam trade has grown over 40% in the past five years and, even with the current unpredictable trends in the global economy, grew almost 10% to reach almost $13 billion in 2015.
“This reflects the solid foundation of our economic relations and strong complementarities between our two economies. It is not difficult to envision that both countries will be able to work together to increase trade value to the shared target of $20 billion by 2020,” said the minister.
Landmark Acquisitions
Thai businesses have expanded their presence in Vietnam through mergers and acquisitions (M&As) as they see this as the shortest way to penetrate this market with more than 90 million consumers.
Acquisitions by Thai conglomerates in the Vietnamese retail market have made big headlines in local and international press.
Typically, Thai Charoen Corp (TCC) spent $876 million on taking over the supermarket chain Metro Cash & Carry.
Joining this trend, Thailand-headquartered Central Group last year acquired a 49% stake in Nguyen Kim Trading Company, a leading retailer of electronic goods in the country. Earlier this year, it completed the acquisition of the grocery chain Big C from France’s Casino Group for nearly $1.1 billion, ending a race that involved large international companies.
The group plans to expand its retail, hospitality and real estate development businesses in Vietnam, where consumption is growing fast in tandem with a vibrant economy, Bangkok Post reported.
 Central Group bought the Big C chain from Casino Group earlier this year. Photo: Thanh Nien newspaper.
With the acquisitions of Metro Cash & Carry Vietnam and Big C Vietnam, Thai players now control half of Vietnam’s modern retail market, said Ngo Tuan Anh from the National Economics University.
In the manufacturing sector, Thailand’s Siam City Cement Public Company Limited (SCCC) will buy the entire 65% shareholding in LafargeHolcim Vietnam, one of the biggest cement producers in the Southeast Asian country.
Siam Cement Group (SCG) has bolstered its operations in Vietnam through M&A. SCG had poured over $700 million into Vietnam as of the end of 2015, through the acquisitions of tile producer Prime Group and majority stakes in several construction material and packaging firms.
The group plans to resume a long-delayed refinery project worth $4.5 billion in Vietnam’s southern province of Ba Ria-Vung Tau by the end of this year. SCG holds 46% in the Long Son Petrochemicals Project, in which Qatar Petroleum previously had a 25% stake. The remaining 29% belongs to PetroVietnam.
Sanan Angubolkul, chairman of the Thailand-Vietnam Business Council, commented that Thai firms are highly keen on beefing up investments in Vietnam as Vietnamese consumers favor Thai goods.
Food and Beverage
Vietnam’s fast-growing economy has turned a large part of the population into middle income class. This offers huge potential for international players in the consumer goods market, especially in the food and beverage.
Singha Group, the Thai conglomerate that produces the namesake beer, in December 2015 struck a deal to acquire minority stakes valued at $1.1 billion in certain subsidiaries of Masan Group, whose business interests range from beer to consumer foods to banking and resources.
Singha Asia Holding Pte. and Thai Beverage Pcl have recently signed up to buy shares of Saigon Beer, Alcohol and Beverage Corporation (Sabeco), which holds the biggest share of the Vietnamese beer market.
More Improvements in Business Environment Needed
Ponpimon Petcharakul, Trade Counselor of the Thai Embassy in Vietnam, noted that in order to drive more high-quality and sizable projects from Thailand, Vietnam needs to boost administrative reforms, improve infrastructure and human resources.
A representative from a Thai conglomerate told the Vietnam Investment Review that his company was interested in investing in some agricultural processing and waste water treatment projects. However, incentives are not encouraging enough and procedures are cumbersome.
The most common complaints voiced by foreign enterprises are related to customs clearance, tax and licensing procedures, said Sesto Vecchi, a lawyer from Russin & Vecchi Law Company.