Vietnam’s outbound investment: Gains and pitfalls

On October 13, Vietnam's leading IT services provider FPT announced its investment in Japanese business consulting services provider LTS Inc., becoming its strategic shareholder.

The investment is expected to help FPT strengthen its capabilities in Japan's consulting industry and target more double-digit million-dollar deals.

“I expect that through the deal, FPT and LTS Inc. would be empowered to compete equally with the world’s leading consultants about digital transformation,” said Truong Gia Binh, FPT chairman.

FPT’s revenue from overseas markets has seen impressive growth lately, leveraging its constant outbound investment ventures.

The figure touched $510 million in the first eight months this year, showing a 28.7 per cent jump on-year. During the period, new order intake value in overseas markets of FPT Group also spiked 42 per cent to reach $672 million.

Besides FPT, a raft of Vietnam’s major firms such as Vingroup, Viettel, Vinamilk, Hoang Anh Gia Lai, and VitaDairy have also scaled up their outbound investment ventures.

Le Thi Thu Thuy, vice chairwoman of Vingroup and CEO of VinFast Global, said in a recent global investment conference hosted by Bloomberg that opening manufacturing facilities in the US would help VinFast take control of supply chain management, maintain price stability, and shorten product delivery time.

Along with private companies, state-owned groups have also been active in outbound ventures.

According to a government recent report sent to the National Assembly 15th Legislature, by the end of 2021, 30 Vietnamese groups had invested abroad, committed in 137 projects with the cumulative disbursed capital volume surpassing $6.61 billion, equal to 55 per cent of total registered capital.

Significantly, last year 88 outbound investment projects generated $7.78 billion in total revenue, up 40 per cent on-year. Of which, 62 projects counted profits, with total post-tax profit volume reaching $810.2 million, showing a 90 per cent jump on-year.

The profit sum distributed to Vietnamese investors during the year amounted to $284.8 million, an increase of $166.3 million, equal 2.4-fold increase, compared to 2020.

Besides positive figures, the investment journey of local businesses abroad is by no mean easy as the government report also shows that there were 30 projects incurring losses, with losses reaching $335.5 million in 2021, up 42 per cent compared to 2020.

In which losses from telecom projects, such as Viettel’s projects in Myanmar and Tanzania, accounted for a lion’s share, surpassing $293 million.

The government report also noted that by the end of 2021 there were 44 projects facing losses with the total cumulative loss volume reaching $1.33 billion, down two projects in the number but up $164.04 million in the amount compared to 2020.

Volatilities in economic, political, social, and security aspects at investment locations; risky investment fields such as oil and gas exploration, mineral extraction; changing and less transparent policies and mechanisms in the host countries; limited capacity with forecast and planning of local investors, among others are the reasons noted in the government report which have dampened the projects’ business efficiency.

To improve outbound investment efficiency, the government has proposed the National Assembly facilitate state-level diplomatic relations between Vietnam and the countries which are the recipients of investment from Vietnam’s state-owned businesses, businesses holding state investment, and propose the host countries to adopt more incentive, consistent and transparent policies, creating stable and safe environment for Vietnamese businesses.

According to the latest statistics by the Ministry of Planning and Investment, in the first nine months of this year, Vietnam pumped $572.3 million of total investment into new and supplemental capital ventures abroad, a 32.4 per cent jump on-year.

While adversities due to COVID-19 are making some firms more prudent with outbound investment ventures, but there are firms that do not hesitate in finding ways to tap into the global market potential.