RCEP advantage slow to take off in Vietnam but opportunities remain
By Asia Investment Research
The Regional Comprehensive Economic Partnership (RCEP) is the largest free trade area in the world and includes the ten ASEAN countries (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam) as well as China, Japan, South Korea, Australia and New Zealand. The agreement entered into force on January 1 this year, just over six weeks ago. RCEP collectively has a market representing 30% of global GDP and 30% of the global consumer population.
Vietnam, which suffered during Covid in 2021, saw a slight decline in FDI into the country, realizing some US$19.74 billion on the year. This was further compounded by border closures and the inability of investors to travel. Outbound investment has also been slow, with only one notable deal secured by Vietnamese investors in Q4 2021, a small stake in an ASEAN-based gaming/blockchain company.
However, starting from a relatively moribund 2021, there are signs that things are starting to come back to life when it comes to investing in Vietnam.
There are more than 25 operating in Southeast Asia, already including Indonesia and Malaysia. In October, CloudEats (Philippines) raised US$5m in an oversubscribed Series A to help fund expansion into 2 new Southeast Asian markets, including Vietnam, over the next 12 months.
Mapletree Logistics Trust (Singapore) has agreed to spend S$1.4 billion (US$1 billion) to acquire 17 warehouses covering 1.2 million m² in China, Vietnam and Japan. Mapletree is now present in nine Asian markets.
Dakdrinh hydropower in Vietnam
The Asian Infrastructure Investment Bank (AIIB) is funding a $47.5m loan ($95m in total) involving the refinancing of existing debt at the 125MW Dakdrinh hydropower plant, majority-owned by PV Power. The hydroelectric plant has been operational since 2014. The total cost of the project in 2011 was 5,921 billion VND (280 million USD); financed in part by a US$178 million loan backed by an export credit agency and a guarantee from the government of Vietnam. The refinancing of this involves the removal of the sovereign state guarantee and an insurance cover to back up the existing debt financing by mobilizing private capital.
At present, the investor market has been relatively slow to reach Vietnam, mainly due to Covid. However, we expect things to improve over the course of 2022, which means there is still time to leverage Vietnam’s manufacturing capabilities and reduce overall production costs to access RCEP markets. .
Our next quarterly review of investment flows in Vietnam will take place in June. Subscription to Asia Investment Research can be obtained here.
For assistance investing in Vietnam, please contact Dezan Shira & Associates at [email protected]
Vietnam Briefing is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia from offices around the world, including Hanoi, Ho Chi Minh City and Da Nang. Readers can write to [email protected] for more support on doing business in Vietnam.
We also maintain offices or have alliance partners who assist foreign investors in Indonesia, IndiaSingapore, The PhilippinesMalaysia, Thailand, Italy, Germany and the United States, in addition to practices in Bangladesh and Russia.