The Hanoitimes - Experts forecast South Korean investors will continue pouring more into the Vietnamese market by M&A or directly compete with local firms.
Many Korean giants are boosting their investment in Vietnam with an aim to raise their influence in the local market.
After acquiring Ciputra Mall from Nam Thang Long Urban Area Development Co., Ltd in 2017, Lotte Group has recently prepared to kick off the construction of the US$600-million project in Hanoi.
Designed to accommodate 1,200 shops, 48 restaurants and cafés, a supermarket of 8,500 square meters, a cinema, and 71,000 square meters of underground parking lots, the project is expected to become the capital city’s largest trade complex once it is put into operation in 2021.
Lotte has planned to expand investment in Vietnam through mergers and acquisitions (M&A) to increase its shopping centers in Vietnam to 60 by 2020. In 2009, Lotte acquired Coralis SA’s project to develop the 65-floor Lotte Center Hanoi trade complex with an investment of US$400 million, which has begun operations since 2014.
The group’s finance arm – Lotte Finance Vietnam – has recently also officially joined the Vietnamese consumer lending market with consumer mortgage loans as its first product. With the support from the parent group, Lotte Finance Vietnam plans to develop installment loans and is expected to launch its credit cards in the first half of 2019.
Besides the retail sector, South Korean giants in the financial and banking industry are also increasing investment in Vietnam to gain larger market share.
Woori Bank Vietnam Ltd for example has expanded its network in the local market with the establishment of five more branches and a transaction office nationwide. The Korean bank has also approved to increase its charter capital to VND4.6 trillion (US$200 million).
Under the same move, Shinhan Bank Vietnam has also established four additional branches and transaction offices in Hanoi and HCM City, raising its total to 30 nationwide. The expansion has helped Shinhan Bank Vietnam retain its position as the foreign bank with the largest transaction network in Vietnam.
The influence of South Korean investors is on the rise in Vietnam not only in the retail, banking and financial sectors, but also in technology, retail, and even culture, sports, and tourism.
According to the Ministry of Planning and Investment, among the 74 countries and territories licensed investment projects in Vietnam in the first 11 months of 2018, Korea with US$3.41 billion ranked second after Japan (US$6.05 billion), accounting for 21.6 percent of the total newly registered capital.
Investment influx on the rise
Experts forecast South Korean investors will continue pouring more into the Vietnamese market by M&A or directly compete with local firms.
However, instead of seeing only big names from Korea involved in Vietnam market as in the past years, the M&A fever will extend to foreign small- and medium-sized enterprises (SMEs).
Jiun Park, senior deputy managing director at the Korea Trade Investment Promotion Agency, said many South Korean SMEs have enquired about the process of doing M&As in Vietnam. Park called this ‘the third wave of investments from South Korea’, following the first wave conducted by conglomerates in labor-intensive industries and the second one by consumer goods companies.
A characteristic of the third wave is strategic alliances between South Korean and Vietnamese companies, Park said, adding that the South Korean partner can provide modern technology, while the Vietnamese side can help with brand presence, market share, and product distribution in Vietnam.
However, to realize the Korean investment inflow, Kim Han Yong, chairman of the Korea Chamber of Business in Vietnam, said the Vietnamese government should apply more friendly policies for foreign investors. He expected administrative procedures for investment projects in IT infrastructure to be further simplified while the law enforcement should be also improved to reduce difficulties for businesses.