Sep 04, 2018 / 07:00

High profits boost foreign firms’ long-term investments in Vietnam

Many foreign companies are planning to pour more investments for expansion in Vietnam in the long run after gaining good business performance in the fruitful market.

AEON Group’s pre-tax profit surged sharply to US$9.96 million last year
AEON Group’s pre-tax profit surged sharply to US$9.96 million last year
Thailand’s Siam Cement Public Company Limited (SCG) has recently shown its ambition plans to increase investments in the Vietnamese market, acquiring a stake in Long Son Petrochemical Co Ltd from Vietnam National Oil and Gas Group.
Under the deal, SCG has acquired a 29 percent stake of the Long Son project for more than VND2.05 trillion (US$90 million). Upon completion of the deal, SCG’s indirect stake in Long Son has increased from 71 percent to 100 percent, of which Vina SCG Chemicals holds 82 percent and Thai Plastic and Chemicals Public Co. Ltd holds 18 percent.
Starting business in Vietnam since 1992, SCG currently has more than 20 companies operating in Vietnam in construction materials, cement, chemicals and packaging industries with more than 8,300 employees.
In the food processing segment, Japanese and Korean companies are also increasing their investments in Vietnam. Notably, Korea’s CJ Group is pouring more capital in many fields from food and e-commerce to entertainment through familiar brands such as Tous Les Jours, CGV, CJ Korea Express and SCJ TV Homeshopping.
The same trend is also seen in the retail industry. Many existing major retailers have so far decided to expand their operation in the country after posting high profits.
After gaining revenue of nearly VND5.14 trillion (US$218.7 million) and pre-tax profit of VND234 billion (US$9.96 million) last year, up 32 percent and 4.3 fold against the previous year, Japan’s AEON Group began the construction of a US$180 million mall in the northeastern city of Hai Phong early this year. The 9.3ha project is expected to become operational in 2020.
The Japanese retailer is also speeding up the construction of its mall in Hanoi’s Ha Dong district, with total capital of about US$190 million. This is the second AEON mall in Hanoi, and the fifth in Vietnam.
South Korea’s Lotte Mart has also joined the trend with plans to open 60 stores in Vietnam by 2020 while its fellow-countryman GS25 also plans to open 2,500 stores in ten years after launching its first shop in Ho Chi Minh City in late 2017.
Upbeat investors in fruitful market
Experts said that foreign investors have decided to enlarge their operations in Vietnam, driven by good business performance.
As for the case of SCG, for example, SCG Vietnam’s total assets reached more than VND36.5 trillion (US$1.59 billion) by the end of June this year while its sales revenue in the Vietnamese market surged sharply by 20 percent year-on-year in the first half of 2018 to over VND14.53 trillion (US$639 million).
Saying that Vietnam will become SCG’s second manufacturing hub after Thailand, Marty Lin Mahaplerkpong, vice president of SCG Vietnam Company Ltd told the media: “It means that we will invest more in the Vietnamese market.”
Not only Thai investors, 70 percent of Japanese enterprises said that they will expand operations in Vietnam in the future, driven by better performance, according to a survey on the performance of 652 Japanese businesses in Asia and Oceania of the Japan External Trade Organization (JETRO).
According to Hironobu Kitagawa, head of JETRO’s Hanoi Office, around 88 percent of the enterprises attributed the reason for business expansions in Vietnam to increasing revenues.
A new study of HSBC also showed that among 1,036 companies polled by the UK-based bank, 76 percent said they already have operations in Vietnam and 30 percent of the surveyed firms expect to expand further in Vietnam in the next two years.