Viet Nam is among the top three investment destinations in Southeast Asia for Singapore-based companies in the next two years, according to an HSBC study released on July 26.

The survey, done by the Singapore Business Federation for HSBC, asked 1036 companies about their interest in overseas expansion.

Eighty six per cent of them are SMEs, defined as those with an annual turnover of S$100 million (US$73 million) or less than 200 workers.

Seventy six per cent said they already have operations in Viet Nam and 30 per cent of them expect to expand their business in the country in the next two years, a rate exceeded only by Indonesia and Malaysia.

Viet Nam’s growing consumer market and overall investment climate are key drivers for future inbound investment, the survey found.

It said 81 per cent of respondents who plan to invest or expand in Viet Nam cited potential customer demand in the country, 75 per cent highlighted overall investment climate and 63 per cent pointed to business costs.

Winfield Wong, country head of wholesale banking, HSBC Viet Nam, said: “Whilst Viet Nam’s growing consumer base is already well recognised by Singapore corporates, the report shows that many businesses are looking to double down on our demographic dividend.

“Beyond the consumer piece, Viet Nam’s manufacturing – whilst already strong - is now entering into the higher-end space. So while many corporates may base their treasury and other back-office functions in Singapore, a lot of revenue-making operations are [carried out in] Viet Nam. This is only expected to ramp up with Viet Nam climbing up the supply and value chain.”

Partnership opportunities

Most of the Singapore-based SMEs entering or expanding in Viet Nam will have or are seeking an in-country relationship. The research found more than 63 per cent of those surveyed had a distributor or joint-venture arrangement in Viet Nam.

“Most Singapore-based SMEs recognise that the recipe for success in overseas ventures includes selecting the right local partners and advisers,” Wong said.

“To seize these opportunities, local enterprises need to take a proactive stance, by plugging into the network and actively reaching out to expanding Singapore-based SMEs in advance,” he added.

In 2016 Singapore was the third largest source of FDI for Viet Nam, accounting for $2.41 billion.

As of October last year the island nation had invested a cumulative $41 billion, according to the Viet Nam Trade Promotion Agency. — VNS