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Top 5 promising industries for international businesses to consider in Vietnam post-pandemic

Updated time: 21 Sep, 2020, 09:30 (UTC+08:00)

Through timely and effective COVID-19 reaction plans and strategies, Vietnam's economy has overcome many difficulties and is fast emerging as a likely post-pandemic winner, attracting the attention of international businesses. We highlight five industries in viet nam with the greatest potential for growth and investment : International business, Real estate investment, investment funds, manufacturing company, trading company, Foreign direct investment.

Top 5 promising industries for international businesses to consider in Vietnam post-pandemic

1. Construction and Building investment

One of the fastest growing industries in Vietnam is construction. Over the last 10 years, the construction industry in Vietnam has grown by 8,5% per year. This remarkable growth rate will not stop in the near future as a result of the government's efforts to improve the quality of infrastructure. The goal is to attract investment in infrastructure construction, tourism and housing projects across the country.

Ongoing urbanization is still increasing steadily and will continue to generate demand for residential and infrastructure development. Increasing in urbanization has helped the real estate and construction materials' markets achieve positive growth.

According to risk and research company Fitch Solutions, the construction sector is expected to grow rapidly at an annual average of above 7% over the next decade, supported by strong macroeconomic conditions and visionary investment funds.

Fitch stated that foreign direct investment will play a key role for the expansion of Vietnam's industrial buildings sector, as Vietnam becomes a global manufacturing hub. It also believed the Coronavirus pandemic will lead to further shifting of production lines away from China, which Vietnam is likely to benefit from.

2. Manufacturing investment

Vietnam in 2020 has emerged as an attractive destination for multinational corporations and manufacturing companies. This came from the fact that Coronavirus pandemic and trade tensions have driven the shift of production lines from China to Southeast Asian countries. Currently, many manufacturers are planning to relocate their production sites in order to find alternative markets in case prices rise.

Particularly, multinational trading companies such as Samsung, LG and many Japanese electronics manufacturing companies have been moving factories from China and India to Vietnam, or have established new production facilities in Vietnam rather than in China.

Vietnam also has a broad spectrum of manufacturing specialties, ranging from home textiles and apparel to furniture, printing, and wood products. Investors can expect Vietnam to add more versatility as its manufacturing scene grows. Another significant advantage when setting up a manufacturing company in Vietnam is the cost. The labor cost rate in Vietnam is roughly one-third the rate in China, production line costs less and tax incentives are rather significant.

3. Real Estate investment

The US-China trade war and COVID-19 pandemic, despite the negative aspects, has benefited Vietnam, particularly in the real estate sector. The wave of manufacturing factories migration from China to Vietnam creates a high demand for this already-booming sector.

According to JLL, a global real estate and investment management firm, although the pandemic was currently causing difficulties for investment decisions or relocation activities, industrial park developers remained confident of increasing land prices as they recognized the long-term potential in Vietnam's industrial segment.

During the pandemic outbreak, approximately thousands overseas Vietnamese around the world have returned to their hometown for a safer place, which is a huge opportunity for Vietnamese real estate market to expand.

Before that, foreign real estate investors have already focused on housing in Viet Nam, usually in partnership with a local developer. Urbanisation has created ongoing demand for housing in large urban centers. International businesses, especially from India and Japan, are finding their ways to support and explore opportunities in projects such as road, power generation and transmission, and rural electrification.

However, real estate investment can be different as a local and as an international business, such as the acquisition of real estate, the regulations, the financing options and the purchasing processes. It is better to understand how this market works on the spot, and to learn the codes before making decisions.

4. E-commerce investment

In recent years, Vietnam has witnessed the rise of Electronic commerce (or e-commerce) with growth rates ranging from 25 - 35% each year. These numbers are expected to increase a few more this year as the COVID-19 pandemic has greatly affected commodity trade as well as consumer demand, even changing consumer shopping habits from offline to online.

The internet economy in Vietnam has acquired more than US$1 billion of foreign direct investment in the past four years. Currently in 2020, Vietnam is reported to have a population of nearly 97 million people with 67 million smartphone and Internet users, 58 million social media users, making Vietnam an attractive country for abundant investors.

If an international business is interested in investing into the Vietnam e-commerce scene, there are 3 most common types of e-commerce business it should notice:

Online Retailers: The online retailers in Vietnam have their own warehouses and distribute their own products without having to rely on other online vendors limited capacity.

Online Marketplaces: An online marketplace, like Amazon, Ebay and Alibaba, is a website or app that facilitates shopping from many different sources. Owners of the marketplace do not have any inventory, instead they will have trading companies selling products under their marketplace platform.

Online Classifieds: In Vietnam, online classifieds are pretty much the same as online marketplaces. One main difference between them is that an online classified website or app does not provide payment service. Buyers and sellers have to set up and process the transaction by themselves.

5. Fintech investment

In Vietnam, fintech is identified as a potential investment area, attracting the capital of many "hungry sharks". According to a joint report by PWC, United Overseas Bank (UOB), and the Singapore Fintech Association, in 2019 Vietnam ranked second in ASEAN in terms of fintech investment funding, attracting 36% of the region's fintech investment, second to Singapore (51%).

With its young demographic, rise in consumer spending, and growing smartphone and internet penetration, Vietnam has emerged as a significant market for fintech investment funds. Roughly 47% of Vietnamese fintech startups' main focus is on digital payments, the highest concentration in the region. Peer-to-peer (P2P) lending is another popular segment, with more than 20 companies currently expanding the market.

The COVID-19 pandemic, despite its negative impacts on many industries, has created a great opportunity for fintech. The fear of the disease spreading through physical contact when dealing with cash is one of the reasons why more Vietnamese people are using fintech.

Assessing opportunities for Vietnamese fintech investors in this period, Tran Viet Vinh, Managing Director of FIIN Financial Technology Innovation Joint Stock Company said that this period brings an opportunity for businesses operating in the field of payment and digital finance in Vietnam. Consumer behavior is shifting from cash to cashless finance as a result of dealing with the pandemic, and will continue this way as people realise the convenience it brings to their daily transactions.

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