Singapore’s full-scale industrial blitz

Together with strong interests in real estate, construction, and manufacturing, Singaporean investors have been trending towards healthcare and renewable energy projects in Vietnam to cash in on rising local demand and the government’s supporting policies. Bich Thuy reports.

Singaporean firms are finding robust opportunities in a wide variety of local industries

In April, SHS Holdings and Singapore’s Sinenergy Holdings signed a memorandum of understanding with Ninh Thuan province to develop a $360 million solar power and high-tech agriculture complex. The 300MW solar farm project is slated for completion in July 2019.

That same month, Singapore-based The Blue Circle and Vietnam’s TSV commenced work on the Dam Nai wind farm in Ninh Thuan, marking the official entry of The Blue Circle into the local renewable energy market. The $80 million project is scheduled for completion in October 2018.

According to the Singapore Business Association in Vietnam (SBAV), renewable energy is an emerging trend among Singaporean investors in Vietnam, where electricity consumption outpaced the country’s economic growth rate by two-fold over the past few years.

Last year, Armstrong S.E. Clean Energy Fund, a dedicated renewable energy private equity fund based in Singapore, and IFC, a member of the World Bank Group, announced an investment in Gia Lai Electricity JSC (GEC), which is one of the largest private sector hydropower players in Vietnam.

“With the current introduction of the feed-in-tariff of 9.35 US cents/kilowatt-hour and Decision No. 11/2017 on the Support Mechanism for the Development of Solar Power Projects, Vietnam has become more appealing to Singaporean investors in the field,” Jazreel Lim, president of SBAV, told VIR.

Renewable energy is not the only field Singaporean investors are expanding into. Healthcare is also a growing trend among Singaporean investment in Vietnam, where locals spend about $2-3 billion on healthcare services abroad annually, according to the Ministry of Health. There is a yet unmet demand for high-quality healthcare services in the country, driven by an expanding middle class and higher incidence of lifestyle-induced diseases.

“There appears to be a trend towards rising consumerism in Vietnam, and healthcare and renewable energy. The interest in healthcare and renewable energy could be due to government policies which encourage such sectors,” said Lim.

Government reform in opening up sectors which were previously restricted or capped for foreign investment, like pharmaceuticals, healthcare, and state-owned enterprises (SOEs), will influence the focus of investments from Singapore, she added.

Lim cited Ministry of Planning and Investment (MPI) statistics as saying that in 2016, healthcare and life sciences did not rank among the top five attractive sectors for Singaporean investors. However, in the first half of 2017, there has been a slight change in sector investment. Healthcare and life sciences now rank fourth, with total newly-registered capital of $21.36 million, after real estate and construction, food and drink, and industrial manufacturing.

The latest case is Singapore-based private equity firm Quadria Capital, which completed its investment into Ho Chi Minh City’s FV Hospital in June. Singaporean investment firm Temasek has announced a move to boost investment in Vietnam, one that covers the development of private hospitals. Meanwhile, Singaporean infrastructure firm CPG is planning to build a high-end hospital project in the central province of Binh Dinh, with a stated goal of developing the province into a famous healthcare destination.

Hoan My, Hoa Lam – Shangri-La, and Hanh Phuc Hospital are among the success stories of Singaporean firms in the lucrative local healthcare market.

Traditional top interests

According to SBAV statistics, in 2016 real estate and construction was the most appealing sector for Singaporean investors in Vietnam in terms of newly-registered capital. The rankings stayed strong through the first half of 2017.

“Real estate and construction, and manufacturing – including textiles and garments – are among the largest sectors by value. Historically, real estate and construction have been key industry players in Vietnam, other than  manufacturing,” said SBAV’s Lim.

With its young population, growing middle class, and sustainably increasing FDI, Vietnam has emerged as a potential market for Singaporean property giants such as Sembcorp, CapitaLand, Mapletree, Keppel Land, and Ascendas.

A symbol of the strong relationship between Vietnam and Singapore, the Vietnam-Singapore Industrial Park (VSIP), of which Sembcorp is a major shareholder, has expanded rapidly, with eight integrated townships and industrial parks in Binh Duong, Bac Ninh, Haiphong, Quang Ngai, Hai Duong, and Nghe An. VSIP has thus far attracted 690 companies for a total investment of $9 billion.

In 2016, Singapore led the pack in terms of reported M&A deals, with 20 deals in real estate and construction, and came second in terms of deal value at $900 million, just behind Thailand at $1.2 billion.

The trend continued in the first quarter of 2017, when the local property market witnessed strong Singaporean investment through fresh capital, capital increases, and the acquisition of new projects.

Though ranking behind property, manufacturing is also a big investment focus for Singaporean firms in terms of newly-registered capital in 2016 and the first half of 2017, especially for multinational corporations (MNCs) which have headquarters in Singapore.

According to SBAV statistics, electronics and textiles ranked among the top five most attractive sectors to Singaporean firms in Vietnam in 2016, with total newly-registered capital of $133.44 million and $121.15 million, respectively.

“Singapore is one of a few global financial hubs in the region, and home to many global and regional MNCs. Singapore will continue to be a major source of investment to other countries in ASEAN, including Vietnam,” SBAV’s Lim noted.

The $2.07 billion Nam Dinh 1 thermo-power project, invested by a Singapore-based joint venture incorporated by Saudi Arabia’s ACWA Power and South Korea’s Taekwang Power Holdings, is the latest licensed project in Vietnam’s energy sector, and one which reflects the strong investment interest among MNCs based in Singapore.

Feasibility studies for the other long-awaited project in the power sector – the gas-to-power project in Dung Quat in the central province of Quang Ngai – could be completed by the end of this year, according to Sembcorp.

This is the second power project that Sembcorp will be involved in locally. Around 10 years ago, the Singaporean firm, in a partnership with Kyushu Electricity, Sojitz Corporation, and BP, invested in the 749MW Phu My 3 power plant.

Earlier this year, the global processing and packaging solutions company Tetra Pak received a licence to build a $124 million paper-board carton factory in Binh Duong.

“With the rapid growth in food and beverage manufacturing, we saw that it was high time for Tetra Pak to set up our first factory here in Vietnam,” said Robert Graves, managing director of Tetra Pak Vietnam.

In addition to the aforementioned sectors, logistics and retail have become increasingly attractive to Singaporean investors.

Singaporean logistics firms, including APL Logistics Vietnam, YCH Group, and Pan Asia Logistics Vietnam, are expanding in the Vietnamese market in anticipation of upcoming free trade agreements (FTAs).

In 2016, food and drink ranked third among the largest sectors by newly-registered capital at $271.42 million. In the first half of 2017, the Singaporean investment in this sector  reached $73.8 million, ranking second.

In early 2017, Singapore-headquartered food and beverage firm Fraser & Neave (F&N) succeeded in its bid to acquire an additional 5.4 per cent in dairy firm Vinamilk, increasing its stake to 16.35 per cent.

Wilmar International Limited, a leading Asian agribusiness group, is keen on developing a $30 million soy bean factory in Binh Dinh province to cash in on the growing local demand.

Future movements        

The Vietnam-Singapore Economic Connectivity Agreement, signed in 2005, created an important co-operation mechanism which over the years has strengthened the two countries’ ties in investment, trade and service, finance, ITC, education, and transport. It also helped to facilitate the implementation of bilateral agreements, with transparent and favourable investment policies included, further supporting Singaporean investment in Vietnam.

In 2011-2016, the number of newly-licensed, Singapore-invested projects increased 12.97 per cent annually on average, while total newly-registered capital rose 15.16 per cent. 

Vietnam encourages Singaporean firms to invest in manufacturing, real estate, infrastructure services such as seaports and transport systems, energy, tourism, IT and communications, banking and finance, logistics, education and training, trade and services, and creative industries, according to the MPI.     

Lim said tech, e-commerce, manufacturing, food and drink, education, and retail will remain the future focuses for Singaporean investment in Vietnam.

“The focus of investments from Singapore will be influenced by the following factors: strengths of the companies based in Singapore, the power of Vietnam as manufacturing base, the power of Vietnam as emerging consumer society, and government reform in opening up sectors,”  she added.

See Yong Sheng, an SBAV member, said, “In the future, real estate in Hanoi and northern Vietnam will be more attractive to Singaporean property developers, driven by improved infrastructure, cheaper prices of apartments than in Ho Chi Minh City, and increasing demands for apartments in Hanoi due to urbanisation.”

Singaporean investors will also maintain their interest in the garment and textile industry, benefitting FTAs, he added. “Hanoi, Ho Chi Minh City, Danang, Binh Duong, and Haiphong will remain the most appealing destinations for Singaporean FDI.”

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