July 22, 2022
Property and logistics have been considered the trend of South Korean investment in Vietnam in recent times and are expected to keep surging in the near future.
Lee Jong Seob, Chairman of the Korea Trade and Investment Promotion Agency (KOTRA) in Southeast Asia-Oceania and Managing Director of KOTRA in Hanoi stated that South Korean companies have been heavily investing in Vietnam’s real estate and logistics markets.
“I think this is the right direction as the investment in warehouses and transportation is crucial for the development of Vietnam’s industries. And since the real estate and construction sectors reflect the economic situation, the fact that these industries are on the upswing shows Vietnam’s economy is likely to recover soon,” he told The Hanoi Times.
David Jackson, CEO of Colliers in Vietnam, said he has witnessed increasing interest from South Korean investors in Vietnam’s industrial property markets, including manufacturing facilities, warehouses, and logistics, especially in the northern regions.
According to the CEO's analysis, the Vietnamese Government is boosting public investment in infrastructure development as well as releasing investment-induced policies to quicken economic rebound and fuel long-term growth. The shift in consumer behavior to online shopping and cashless payment after the pandemic has beefed up the expansion of e-commerce, warehouses, manufacturing, and logistics facilities, hence driving demand for industrial property and logistics in the country.
The Covid-19 pandemic delayed South Korean investors’ on-site surveys for new investment plans in Vietnam. However, the reopening of international flights in the first quarter of this year has allowed them to resume their activities, according to some local insiders.
In the latest report conducted by Savills Vietnam in June, Andrew Lee, Senior Manager of Korean Desk Business Development, noted that the South Korean enterprises are actively looking for investment opportunities to enter and expand in Vietnam’s real estate market. He expected many real estate projects will be carried out in the country in the coming time.
Among the South Korean-invested projects in Vietnam, the Nam Binh Xuyen Green Park invested by YSL Group in the northern province of Vinh Phuc was a newcomer. With an investment capital of US$2 billion, the project will provide modern industrial land and properties for investors in high-value-added fields such as electrical equipment, data centers, and logistics. It is expected to launch in the second quarter of 2023.
Kwak Il Hwan, Vice Chairman of YSL Group, said although the Covid-19 pandemic left serious consequences on the economy in the past two years, Vietnam is one of the world’s countries that responded well to the pandemic, stabilizing inflation as well as recovering economic growth.
“In fact, in the first half of this year, the Southeast Asian country continuously attracted large investors in various fields,” he told The Hanoi Times. “The country boasts many localities with geographical advantages and developed transport infrastructure. Therefore, we believe that Vietnam is still an ideal destination for businesses who want to diversify their profile and avoid depending on one of the supply chains.”
From another perspective, Colliers in Vietnam, a diversified professional services provider, and investment management company, also pointed out that the South Korean government’s New Southern Policy Plus has paved the way for South Korean firms’ further expansion into the Southeast Asia region, not only for diversifying manufacturing, and supply chain, but also extending into sectors which support the development of urban infrastructure and smart cities.
He added that in the industrial real estate and logistics sectors, great potential awaits thanks to the Vietnamese Government’s strong commitment to push for public investment in infrastructure and develop new industrial parks across the country, especially in northern provinces surrounding Hanoi and Ho Chi Minh City.
In fact, South Korean developers are seizing the opportunity with big projects such as Lotte Eco Smart City Thu Thiem by Lotte E&C or Nha Be’s Zeitgeist new urban area by GS E&C.
As one of the largest real estate developers, Lotte Land Vietnam, the subsidiary of Lotte E&C, believes it is natural that many South Korean investors now also focus on better logistics facility properties.
Kim Young Ju, General Director of Lotte Land Vietnam, said a host of factors including the growing Vietnam’s e-commerce market with stronger boost from the Covid-19 pandemic, the huge success of some popular e-commerce platforms including Shopee and Lazada, the factory relocation of many global manufacturers from China to Vietnam and rising trade turnover are spurring demand for more advanced logistic infrastructure.
“We are expecting the logistic industry, including logistics real estate [warehouses, distribution facilities, fulfillment centers] will keep expanding. After thorough research to find some proper location for logistic development, we secured two land plots in the Southern part of Vietnam. Each land located in an industrial park with all the surrounding infrastructure ready,” he told The Hanoi Times.
“We are developing business mainly in big cities like Hanoi and Ho Chi Minh City but we expect to expand our business to other regional bases as well, in line with the development of Vietnam so as to raise the value of Lotte brand name in Vietnam,” he underlined.
The CEO of Colliers in Vietnam said it is noteworthy to keep an eye on the international competition as industrial property and logistics are on the rise not only in the Asia Pacific but also across the globe.
South Korean investors were among the first to enter the Vietnamese market in the early 1990s and since then has been one of the country’s largest foreign direct investment (FDI) partners, according to Colliers in Vietnam. With continuous improvement in investment policies, provision of tax incentives, and quick removal of obstacles, Vietnam has made great strides in lower entry barriers for foreign investors, including South Korean firms.
The Ministry of Planning and Investment’s latest data showed that despite the impact of the Covid-19 pandemic, South Korea ranked second among countries investing in Vietnam in the first five months of 2022 with a cumulative investment capital in Vietnam of US$2.06 billion, making up 17.6% of the total, a 12.6% year-on-year increase. As of May 20, South Korea topped the list of foreign investors with almost US$79.1 billion, accounting for 18.6% of total investment capital.
The CEO of Colliers in Vietnam added: “All mentioned above facts and data strongly signify the attractiveness of Vietnam market. It is now a golden time for Vietnam to deepen its economic ties with South Korea, opening more two-way investment opportunities for businesses from both countries.”
Furthermore, success experiences in attracting and retaining South Korean investors will be multiplied, helping Vietnam to become even more attractive for foreign investors in the global market, he noted.
"Although Vietnam has advantages in geography, young and dynamic workforce, and relatively low operating costs, the country still has a lot to do in terms of high-tech integration, connectivity and sustainability," said Kwak Il Hwan from YSL Group.
Tackling these aspects would help the country attract more investment with high technological content and more sustainability, and level up its competitive edge in the global market, he added.
According to Chairman of KOTRA Lee Jong Seob, when an investor decides to set up its branch or factory in a country, it often aims for a long-term investment of at least 10-20 years. Therefore, they look at factors such as the growth potential of the market, the stable business environment, and the consistent support of the government.
He added that as Vietnam aims at both qualitative and quantitative economic growth, business-friendly environment and consistent policies are needed to ensure that FDI enterprises, which are one of the pillars of Vietnam’s economy, can operate in the long term.
“There are currently about 9,000 South Korean projects in Vietnam. They account for more than 25% of Vietnam’s total export turnover, contributing to Vietnam’s economic development. And the fact that there are more and more South Korean companies coming to Vietnam and cooperating with Vietnamese businesses will enhance the global industrial competitiveness of both Vietnamese and South Korean businesses in the future,” Lee Jong Seob underlined.
To promote trade and investment between the two countries, KOTRA is expanding its operation and services and planning to support Vietnamese and South Korean enterprises to participate in large-scale trade fairs and organize seminars on Vietnam’s investment environment.
The CEO of Colliers in Vietnam said that much has been done by the government to encourage foreign investors to expand their business in Vietnam as well as attract new ones. One good example is the elaboration of an annual FDI report by the Vietnam Association of Foreign Invested Enterprises, which provides a comprehensive assessment of the results of foreign direct investment attraction, the business activities of foreign-invested enterprises, and analysis of the nation's investment environment.
Moreover, the Ministry of Planning and Investment (MPI) has built the National Portal on Investment to promote data governance and localities have also worked on new tax and foreign investmennt incentive policies.
Echoing Jackson, Kwak Il Hwan said that in recent years, the Vietnamese Government has issued many policies to attract foreign investors. For example, the 2020 Investment Law has actively supported foreign investors' activities, such as adding industries and subjects eligible for investment incentives or reducing the list of conditional business investment lines.
He added that accelerating the process of building a digital government has helped reduce unnecessary procedures and make it easier for businesses to learn and fulfill their obligations through technology utilities.
However, “there are still problems in policy implementation, causing obstacles for foreign investors in general and for us in particular. For example, it is not easy for enterprises to enjoy investment incentives due to the cumbersome procedures,” Kwak Il Hwan said.
Jackson also said there is room for further improvement, such as shortening the time for approval and implementation of infrastructure projects, making it more transparent, concise interpretation of laws and regulations, and more simplified administrative procedures to reduce compliance costs, helping ease the market access for foreign investors.
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