UOB secures more Asian investments for Vietnam as opportunities grow
By Celine Chen
SINGAPORE, NNA - Singapore's UOB is accelerating efforts to help Asian companies seize opportunities in Vietnam after inking an expanded Memorandum of Understanding (MOU) with the country’s Foreign Investment Agency (FIA).
Announced last Friday (Nov. 27), the agreement will see the global bank facilitating a new pipeline of more than $1.12 billion (SG$1.5 billion) in foreign direct investments (FDI) into Vietnam after having secured investments worth over $2.24 billion (SG$3 billion) for the country.
It is their second MOU after the first was signed in 2015. The latest pact will see the vast opening of investment opportunities extending beyond the first-tier cities of Ho Chi Minh city and Hanoi to cover fast-developing cities such as Bac Ninh, Hai Duong, Binh Duong and Dong Nai.
Serving the trade corridors between ASEAN, the bloc of Southeast Asian countries, and Greater China, UOB has helped more than 150 companies to grab opportunities in Vietnam in the past five years.
The bank, which has a stronger presence in Asia, aims to double the number in the new accord, it said in a media statement, adding that more Singapore companies are also expected to invest in Vietnam with growing ties between the two countries.
Wee Ee Cheong, Deputy Chairman and CEO of UOB, said, “At UOB, we have been steadfast in our support of Vietnam’s economic development since establishing our roots in the country almost 30 years ago. Over the years, we have experienced first-hand the rise of Vietnam, driven by a strong economy that is set to become the fourth largest in ASEAN by the end of this year."
The expanded MOU with FIA will enable UOB to help regional companies "tap Vietnam’s vibrant economy, driving their sustainable advancement and boosting trade flows and job creation across ASEAN," said Wee.
"With the seamless connectivity and sectoral expertise we offer throughout our regional network, UOB is well placed to support companies looking to diversify their supply chains amid disruptions caused by the global pandemic,” he added.
The Southeast Asian country has continued to be an attractive destination for foreign direct investment, with an average yearly growth rate of 9 percent from 2015 to 2019, according to UOB.
Its allure to investors remained unabated even during the COVID-19 pandemic crippling the region. The country achieved a gross domestic product (GDP) growth of 2.62 percent in the third quarter of 2020 even as neighboring economies were faltering, said the bank.
But due to the disruptions caused by the coronavirus pandemic, foreign direct investment in Vietnam slipped 2.4 percent to $17.2 billion in January-November, down from the same period last year, the Vietnam Chamber of Commerce in Singapore told NNA.
However, it is still an impressive performance and UOB is helping companies from across Asia to invest in its high-growth sectors. The bank noted that the Vietnamese government is keen to develop sectors such as sustainable energy, manufacturing, infrastructure, healthcare and technology.
UOB said, "As part of the value chain, small- and medium-sized enterprises (SMEs) which support these sectors will also benefit. More than 2,000 jobs in Vietnam are also forecast to be created from the next wave of investments. This is on top of the more than 17,000 jobs already created under the first MOU."
Importantly, Vietnam's GDP in 2020 is estimated to reach $340.6 billion, exceeding Singapore's $337.5 billion and Malaysia's $336.3 billion, said David Nguyen, Chairman of the Vietnam Chamber of Commerce, when highlighting comparative estimates.
"Regardless of the impact of the COVID-19 pandemic, Vietnam is forecast to be one of the fastest-growing economies in Southeast Asia," he said.
Industries that have been thriving well in Vietnam are business process outsourcing (BPO); solar and wind energy; retail banking and fintech; food and modern agribusiness, said Nguyen.
Sectors that are now growing by leaps and bounds are financial services and fintech; e-commerce; fitness and wellness; and advertising and media, he added.
Under the new MOU, Vietnam's FIA will provide companies referred by UOB with support in investment application.
Additionally, UOB-FDI advisory team will offer investors with local insights, market-entry support and customized financial solutions, as well as connecting them with regional business opportunities.
The UOB team and FIA will conduct webinars with investment experts from the bank’s partner organizations, such as government agencies, consulting firms and multinational companies.
With Singapore businesses naming Vietnam as their top favorite market for overseas expansion, UOB will continue to work with Singapore government agencies and trade associations to facilitate their investments.
Sembcorp is one such company, with whom UOB has been working closely in Vietnam to support its industrial park projects.
Kelvin Teo, CEO of Sembcorp Development, said, “Vietnam is a key market for Sembcorp Development. We operate 10 integrated townships and industrial parks in Vietnam under our VSIP10 joint ventures, of which three were launched these couple of years. UOB has supported Sembcorp’s growth in the country and we are happy to build on our strong partnership while expediting sustainable urban solutions as part of Vietnam’s industrialization.”
UOB has also assisted start-ups and SMEs from across ASEAN in their Vietnam ventures. In 2019, UOB connected Ruangguru, an Indonesian startup providing education technology solutions, with FIA to facilitate its operations in Vietnam, apart from supporting its banking needs.
This year, UOB also assisted Esco Lifesciences Group, a Singapore life-sciences company, to expand their business in Vietnam by providing banking solutions to support its operations and cross-border trading activities.
The Asian Development Bank (ADB) has revised its Vietnam’s 2020 growth forecast to 1.8 percent, down from the previous estimate of 4.1 percent in June. But growth is expected to bounce back to 6.3 percent in 2021, according to the bank’s report in September.
"The manufacturing sector’s importance to Vietnam’s overall economy is clear, and so, key steps have been taken to keep operations running despite lockdowns in other countries. For example, engineers from two major international electronics manufacturers were allowed to enter Vietnam earlier this year to ensure their factories continued to run at full capacity," Nguyen told NNA.
The government also collaborated with local businesses to ramp up production of personal protective equipment (PPE) for essential workers, helping them to gain access to global markets, he said.
"As manufacturers across the globe start to rethink their supply-chain strategies to address the frailties exposed by the pandemic, Vietnam remains in a strong position. The country has long been an attractive offshoring destination. Its offshoring subsector could grow strongly, especially if global companies make greater efforts to diversify their supply chains to Vietnam in the wake of the pandemic," Nguyen added.
However, Vietnam still needs to attract more foreign banks as well as more foreign investments to boost local banks and financing, he said.
Currently, the country has nine foreign-owned banks, about 50 foreign bank branches, more than 50 representative offices of foreign credit institutions and many foreign-owned finance companies.
Nguyen said his chamber of commerce has been working with UOB in both Singapore and Vietnam in the last several years to help not only Singapore companies in Vietnam but also Vietnamese companies to "expand to the world through Singapore gateway".
He noted that UOB has been firmly entrenched in Vietnam to help businesses especially SMEs.
He said, "We do think that the competition in banking in Vietnam will become stronger. Yet, we believe that UOB bank, with the right position to tackle the hottest growth in e-commerce, fintech and digital payment, would be able to thrive in Vietnam.
UOB’s own ties with Vietnam began in 1993 when the bank opened its representative office in the country. It remains the first and only Singapore bank to establish a foreign-owned subsidiary in Vietnam, doing so in 2018, said UOB.
Today, UOB Vietnam has three offices, two in Ho Chi Minh city, and one in Hanoi, the capital.