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With billion-dollar deals being struck between Vietnamese companies and Thai conglomerates over the past few years, Vietnam is ready for a second wave of investments from medium-sized Thai businesses, buoyed by the growing consumer market, emerging sectors and the overall investment climate, says HSBC Bank Vietnam.
Pham Hong Hai, CEO of HSBC Bank Vietnam, points to a surge in Thai investors.
The country of 96 million is seen as the next favourite investment destination among mid-sized companies from Thailand looking to expand regionally. "We have seen Thai investors coming into Vietnam, mainly from Thai conglomerates making large investments in retail and food and beverage sectors," Pham Hong Hai, chief executive of HSBC Bank Vietnam, told the Bangkok Post. "However, this is just the first wave, and I believe that we haven't seen the full potential of Thai investors yet."
Interest at different levels
Thai conglomerates have been responsible for Vietnam's biggest-ever merger and acquisition (M&A) deal, worth US$5 billion (167 billion baht), which saw Thai Beverage buy a 54% stake in Vietnam's top brewer Sabeco, the main brewer of the Saigon and 333 beers.
Central Group has kept an eye on Vietnam, forming a strategic partnership with NguyenKim Trading Joint Stock Company in 2015. Central invested in the retail chain LanChi mart in the rural north of Vietnam and in 2016 invested with Big C in a 1.1-billion deal.
Charoen Pokphand Group set foot in Vietnam in 1988 with a multi-sector production system ranging from animal feed to farm to food processing and retail distribution.
"Today, we are starting to see other emerging sectors that are attracting the new wave of investments such as renewable energy, manufacturing and electronics," Mr Pham said.
He said Thai investors are starting to make Vietnam their top priority investment destination as a lot of them see that they can do business well in Vietnam, given the smooth and speedy integration into the local market.
"The second wave I started to see are mid-tier companies in the middle-market enterprise sector," he said. "They want to participate in the supply chain as they feel that there have been interesting developments in the country. The level of confidence is very high.
"Going forward, I expect to see a more steady inflow of smaller-sized projects from Thailand ticketing around $100 million per project, rather than a few billion. This will be the rising trend."
The investment value might be smaller than initially seen, but there will be more companies coming into Vietnam in different sectors.
Mr Pham also noted that the key challenges for middle-sized investors entering an emerging market such as Vietnam will be the knowledge on regulations, market research and establishing the right partnership with local businesses, among other things.
For larger companies find it easier to go overseas because they have big platforms, but mid-tier companies find it more challenging as they may not have access to resources and privileges, he said.
Banks to the rescue
Mr Pham said foreign banks such as HSBC Bank Vietnam can offer better integrated regional services by acting as an intermediary to facilitate the increased inflow of cross-border investments.
"We provide an advisory role for foreign companies that want to start investing in Vietnam, such as how they can structure the flow of capital and comply with regulations," he said. "We also help connect clients to suitable partners in the local market. HSBC can offer these services to the second wave of mid-tier Thai companies coming into Vietnam."
HSBC Bank Vietnam Ltd is 100% owned by Hongkong and Shanghai Banking Corp Ltd and is also the first entirely foreign-owned bank to operate both branches and transaction offices in Vietnam.
With 150 years of experience in Vietnam, HSBC is the largest foreign bank in Vietnam, providing a comprehensive range of banking services such as Retail Banking and Wealth Management, Wholesale Banking , Global Liquidity and Cash Management, Global Trade and Receivables Finance and Securities Services.
Kelvin Tan, chief executive of HSBC Thailand, said earlier that the added value of HSBC service comes from offering well-connected financial services throughout the region.
"When a Thai customer expresses interest in investing in another country where HSBC operates, the bank will refer the customer to the office in that country, which can provide local information for doing business," he said.
Since 2016, many HSBC customers have started to expand their businesses or production bases in Vietnam to tap into bigger market as well as taking advantage of low labour costs, Mr Tan said.