In December 2021, Vietcetera reported that for the second year running, Singapore was Vietnam’s largest foreign investor by a considerable distance. Approximately one-third of all foreign direct investments into Vietnam was made by Singapore-based companies, totaling just under US$7 billion.
This momentum shows no signs of arrest as 2022 unfurls itself either. One of the most high-profile recent stories on the Vietnamese startup grapevine centered around the mega US$90 million investment into Con Cung, a mother and infant product retailer barely a decade old. The investment round was led by Quadria Capital, a private equity fund provider with a focus on healthcare, based of course in Singapore. This marked Quadria Capital’s second foray into the Vietnamese market, having already acquired FV Hospital back in 2017.
On January 19, TechCrunch reported that Vietnamese blockchain gaming guild Ancient8 had raised US$4 million in seed funding to further develop its metaverse-based P2E (play-to-earn) gaming platform. Just a day later, it was announced that social commerce startup Mio had secured US$8 million in a Series A funding round. In keeping with the Singapore-Vietnam connection, it’s telling that both funding rounds were led by companies headquartered, or with branches in Singapore (Dragonfly Capital and Jungle Ventures, respectively).
With around 2,700 Singapore company-led projects approved in Vietnam, the huge level of investment rolling in is something that’s being welcomed not just by local companies themselves, but by the Vietnamese government. In June 2021, the government publicly encouraged more Singaporean investment, particularly in the central coast city of Da Nang, where there are currently around 30 projects being led by Singapore companies with a total value of just under US$840 million.
The Draw Of Singapore For Investment Companies
Before delving into the many reasons why Vietnam offers such fruitful prospects to Singaporean investment companies, it’s important to understand why Singapore itself is a nerve center for investment firms.
The most obvious factor is that Singapore is considered an easy place to do business in, with a highly developed free-market economy ranked by the World Economic Forum as the most open in the world. This economic strength, especially when compared to the rest of the ASEAN region, puts investors in a strong position to invest heavily in neighboring economies.
This, coupled with a strong legal framework that protects businesses, comparably low corporate tax rates of no more than 17%, as well as double-taxation agreements and tax treaties with a whole host of other nations, and a stable political landscape all make Singapore an ideal base of operations for companies looking to buy a stake in the development of the wider region.
Strong Singapore-Vietnam Trade Links
When it comes to Singapore’s interest in investing in Vietnamese companies, pre-existing and new trade links and agreements play a key role. The ASEAN free trade agreement, bilateral trade of over US$19 billion as of 2020, amendments to the Singaporean Laws on Enterprises and Investments, as well as a 2020 law on Public-Private partnerships have all made trade relations much easier.
Further to this, June 2021 saw the beginning of negotiations over a Digital Trade Agreement between the two nations, showing a keenness to keep bilateral trade rolling on.
Beyond the relationship between Vietnam and Singapore, Vietnam’s 14 free trade agreements with more than 50 economies around the world give it great appeal for foreign investors anywhere.
Vietnam’s Thriving Consumer Market & Business Ecosystem
Vietnam’s economic growth up to and even during the worst of the COVID-19 pandemic has been well documented, and despite an understandable drag in GDP and consumer spending dropped, the country’s middle class is continuing to surge.
By 2035, it’s expected that over 50% of the population will be considered middle class, indicating a much greater potential for consumer and household spending. Circling back to Quadria Capital’s aforementioned UD$90 million investment in Con Cung – made with a view to launching 2,000 stores nationwide by 2025 – it becomes clear that investors are following the signals of a middle-class boom.
However it’s not just Vietnam’s spending potential that’s encouraging Singapore-based companies to invest here, it’s also the talent pool, particularly in the tech field, as well as the rise of an innovative startup ecosystem – one that led to Vietnam heading towards a billion-dollar year for capital investment in 2021.
On the talent side, Vietnam’s focus on STEM education led to there being almost half a million IT talents in the country, according to a report from TopDev – almost 70% of whom are between 10 and 34 years old.
With around 80,000 students expected to graduate in IT alone every year for the foreseeable future, the already robust talent pool is set to keep on growing, and more importantly, they look set to gain exposure to opportunities to thrive as capital investment continues to pour in from Singapore and further afield.