A recent study by the United Overseas Bank (UOB) suggests Vietnam will experience a surge in investments from nearby countries like Malaysia, Thailand, and Singapore over the next three to five years.

The 2016 UOB Asian Enterprise Survey found that Vietnam is a top expansion target for businesses in Malaysia (38%), Thailand (35%), and Singapore (29%). These nations are among the 28% of surveyed enterprises that selected Vietnam as their preferred expansion destination within the next three to five years. The key attractions for these Asian enterprises are Vietnam’s political and economic stability (41%), growing customer base (40%), and favorable tax and regulatory environment (35%).

Vietnam’s attractiveness as an investment hub is further emphasized by its 6.7% economic growth in 2015 and a youthful population, with 60% of its 90 million people under 35. In the first half of 2016 alone, the country attracted a record-breaking US$11.3 billion in foreign direct investment (FDI), a 105% increase compared to the same period in the previous year.

Eric Tham, Head of Group Commercial Banking at UOB, highlighted that the survey results reflect the entrepreneurial drive of Asian businesses to constantly seek out new growth markets.

“The survey indicates that the manufacturing, healthcare and pharmaceuticals, construction and real estate, as well as energy and natural resources sectors are the primary sources of foreign investment in Vietnam. These industries are crucial for Vietnam’s goal of establishing a robust foundation to sustain long-term economic growth,” Tham explained.

“Investments in Vietnam are poised to generate employment opportunities and boost income levels. This, in turn, will create new economic avenues as Vietnam’s burgeoning urban population and expanding middle class increase their spending on consumer goods and healthcare services. Additionally, Vietnamese businesses stand to gain from collaborations with foreign companies, facilitating knowledge sharing and skills transfer,” Tham added.

CKL Holdings, a food and beverage conglomerate, exemplifies this trend. This company expanded its operations to Vietnam, establishing manufacturing facilities in Ho Chi Minh City for beverage production. Chia Chor Meng, Group Chairman of CKL Holdings, stated, “We established our first production plant in 1996, drawn to Vietnam’s vast consumer market, lower operational costs, readily available workforce, and abundant natural resources. Having research and development facilities in Vietnam allows us to tailor our products to local preferences. We have also leveraged Vietnam’s advantageous export environment to distribute our products to 60 countries globally. In response to escalating customer demand, we launched our second factory last year, five times larger than our initial facility.”

The Vietnamese government is actively working to attract foreign investment. One such initiative is the memorandum of understanding (MoU) signed in 2015 between the Vietnam Foreign Investment Agency (FIA) and UOB, aiming to boost investment and trade between Vietnam and Southeast Asia. This MoU signifies FIA’s first collaboration of its kind with a banking institution.

Tham acknowledged that global market uncertainties, such as the sharp decline in oil prices and weak consumer demand in Western economies, might impact Vietnam’s economy. However, he emphasized that Vietnam’s rapid development presents numerous opportunities for Asian businesses.

“Despite a global economic slowdown, the Vietnamese economy continues to exhibit growth. Asian companies that can capitalize on emerging opportunities and cater to the growing demands of Vietnam’s middle class will have a distinct advantage in building robust and sustainable regional businesses,” Tham concluded.

Interested? You can explore the 2016 UOB Asian Enterprise Reports for further insights.

*This survey was conducted by UOB between May and June 2016, involving 2,500 Asian enterprises across mainland China, Hong Kong, Indonesia, Malaysia, Singapore, and Thailand. The survey aimed to understand how Asian enterprises are capitalizing on business opportunities amidst global and regional economic trends and trade flows.

**Source: Doing Business in Vietnam, International Enterprise Singapore