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Local investors eyeing the globe

Released at: 08:56, 18/08/2018

Local investors eyeing the globe

Photo: VET Magazine

Vietnamese enterprises increasingly seeking opportunities to invest overseas.

by Ngoc Khanh

FPT, the global IT service provider headquartered in Vietnam, and Intellinet, a US-based purpose-driven management consulting and technology services firm, reached an agreement on July 12 for FPT to become Intellinet’s major shareholder, expanding the company’s footprint in the US. Mr. Truong Gia Binh, Chairman of the FPT Corporation, revealed it paid $30 million for the deal and a further payment will be based on Intellinet’s business performance over the next three years, putting the total value of the deal at around $45-50 million. “By making strategic investments in Intellinet, FPT is now more than ready to provide comprehensive digital transformation solutions to top companies, elevating Vietnam’s position on the global technology map,” he said.

The US is FPT’s second-largest software export market. In 2017 it earned FPT $50 million, a 17 per cent increase compared to 2016. Software exports are an important growth engine of FPT. Over the last several years its revenue from the segment has grown at an average annual rate of more than 30 per cent and is expected to contribute 50 per cent of the corporation’s total revenue. In the first five months of this year, revenue from the segment was VND2.869 trillion ($127.5 million), up 27 per cent year-on-year and accounting for 34 per cent of the corporation’s total revenue. FPT currently provides IT services in 33 countries, with key markets being Japan, the US and Europe. 

Many other large corporations in Vietnam have also invested overseas and figures are increasing in all regards. 

Going global

In June, the Viettel Group launched a mobile network in Myanmar called Mytel, marking its tenth international market. Total investment was $1.5 billion, accounting for 66 per cent of all registered capital from Vietnam in Myanmar. Viettel’s 2017 revenue from overseas investments exceeded VND38 trillion ($1.7 billion), an increase of 38 per cent against 2016, according to a financial report released in May. It now operates in eleven countries: Vietnam, Cambodia, Laos, Timor Leste, Haiti, Peru, Mozambique, Cameroon, Burundi, Tanzania and Myanmar. Viettel aims to maintain profit and growth from overseas investments of 32 per cent this year compared to 2017, while customer growth is to be 16 per cent, bringing its number of overseas customers to 50 million.

The TH Group, meanwhile, is investing in a dairy cow and high-tech milk processing complex in Russia worth $2.7 billion. The project will be completed within ten years and be divided into three phases in order to house 350,000 dairy cows and a number of dairy plants on a total area of 140,000 ha with a total capacity of 1.8 million tons per year. In January, the group opened the first dairy cow farm in Moscow, with total investment of $500 million.

Also in dairy, Vinamilk has found opportunities for overseas investment via merger and acquisitions (M&As). It holds a 100 per cent stake in foreign companies such as Driftwood Dairy, one of the oldest and top dairy producers in southern California, which it acquired in 2016, and Cambodia’s Angkormilk, in 2015. The two posted impressive revenue in 2017, of $122 million and $20.33 million, respectively, according to Vinamilk’s 2017 annual report. After receiving an investment certificate from the Ministry of Planning and Investment on contributing 100 per cent of capital to establish a subsidiary in Poland - Vinamilk Europe Spóstka Z Ograniczona Odpowiedzialnoscia - the total output of the subsidiary reached nearly 17,000 tons of powdered milk in 2017, with total revenue of approximately $32.4 million.

Investing overseas for more than ten years, Mr. Nguyen Manh Hung, Chairman and General Director of the Viettel Group who was appointed as Acting Minister of Information and Communications on July 25, told local media that the domestic market is becoming saturated and foreign markets are the major playground for businesses that wish to grow. “When heading overseas, competing with the world’s biggest businesses helps us learn more and more and grow faster,” he said.  

For FPT, meanwhile, international markets are lands of potential. “Upon reaching out to the global market, we recognized that Vietnam isn’t decades behind the world, just a few years,” Mr. Hoang Nam Tien, Chairman of FPT Software - part of FPT Corporation - was quoted as saying. 

Looking forward

FDI is one of the fastest and most effective integration channels for world economies to trade with each other, and government policy plays an important role. From September 2015, under regulations in Decree No. 83/2015, enterprises investing overseas no longer need to apply for investment certificates for their projects, but instead need only complete an investment registration certificate. Money transfers abroad are also regulated in the Decree. Prior to being granted an investment registration certificate, enterprises are allowed to transfer foreign currency (but not more than 5 per cent of the total investment capital and not more than $300,000) to meet the cost of project formulation activities. 

According to the General Statistics Office (GSO), Vietnam had 81 newly-licensed projects overseas with total invesment capital of $238.33 million in the first seven months of 2018, while 21 existing projects added capital totaling $41.3 million. Mr. Nguyen Van Toan, Deputy Chairman of the Vietnam Association of Foreign Invested Enterprises (VAFIE), told local media that the results of overseas investment expresses the positive activities by Vietnamese enterprises in increasing their competitiveness and expanding to international markets.

Vietnamese companies have not only invested in traditional markets like Laos, Cambodia, and Myanmar in recent times but have also set their sights on a whole host of other markets. Independent economic researcher Ms. Pham Chi Lan told VET that overseas investment is a type of export and assists enterprise development. “Enterprises bring their skills and technology to build overseas facilities,” she explained. “This also is a way to sell the full suite of their products.”

A report from the National Assembly released in May noted that some overseas investment projects are ineffective and management and financial capacity are limited, while there is a lack of strict control over and dispersion of resources, affecting the capital efficiency of enterprises. Though the legal framework on overseas investment has been gradually improved, there are also many shortcomings that pose problems in State management. 

Analysts have said that Vietnam is still to develop a comprehensive strategy for overseas direct investment, so there are no practical measures to support its development. Some countries have established an agency to assist in promoting overseas investment, such as JETRO in Japan and KOTRA in South Korea. 

In general, successful businesses investing overseas will be a springboard for many other Vietnamese enterprises to invest or continue to invest in other countries, boosting development in both. 

Vietnam had 81 newly-licensed projects overseas with total investment capital of $238.33 million in the first seven months of 2018, while 21 existing projects added capital totaling $41.3 million. Total new and additional capital for overseas investments was therefore $279.63 million.

Banking and finance ranked first in investment overseas during the period, with total new and additional capital of $105.77 million, accounting for 37.8 per cent of the total. Agriculture, forestry, and fisheries followed, with $63.84 million, accounting for 22.8 per cent, then processing and manufacturing with $45.47 million, accounting for 16.3 per cent. 

Thirty-two countries and territories received investments from Vietnam in the period, led by Laos, with $84 million and accounting for 30 per cent of the total. Australia ranked second, with $37.1 million, accounting for 13.3 per cent of the total, while Slovakia was third, with $35.93 million, accounting for 12.9 per cent of the total, then Cambodia, Cuba, and Myanmar. n

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