Vietnam is becoming more well-known as a global innovation hub centered in SEA. Pic: Unsplash

Vietnam attracts foreign investors as electronics retail industry booms

FOREIGN direct investors have been flocking to Vietnam due to a fast-growing retail industry driven by the electronics sector, as growth in their own home countries have slowed.

Vietnam welcomed an estimated US$13 billion of newly registered capital, according to the VnExpress, in the first half of this year, up 1.5 times from 2015. Retail accounted for nearly 40 percent of total deals in the country since last year.

It is also beginning to establish itself as a major manufacturing hub for electronic goods – in terms of foreign direct investment (FDI), Vietnam ranks fourth behind India, China, and Indonesia. Altogether, the four APAC countries have a combined FDI value of US$320 billion.

SEE ALSO: Vietnam on its way to becoming a global innovation hub

Electronic retailers are experiencing a huge boost in growth – the biggest private tech firm in the country, FPT Corporation, and private equity firm Mobile World are the most obvious indicators of such growth, thanks especially to a younger population keen on investing in the latest gadgets.

According to Deal Street Asia, FPT recorded a revenue growth of 35 percent in the first quarter of 2016, and will have built over 300 outlets by the end of this year. Mobile World has expanded its e-commerce electronics store, Thegiodidong, 142-fold since 2007, when it received investment from Mekong Capital.

A report by Business Monitor International (BMI) said: “Vietnam’s consumer electronics industry has expanded rapidly in recent years and is an important force driving the country’s strong economic performance.

“As Vietnam develops rapidly, we expect rising wages over the medium term against a backdrop of low device penetration rates will drive spending growth at a CAGR of 6.5 percent.”

The report also added that electronics sales in Vietnam are expected to grow 28.6 percent from US$6.3 billion in 2016 to US$8.1 billion in 2020.

There are also a number of other factors at play that is driving foreign investment interest. For example, investors are making a move now in anticipation of the Trans-Pacific Partnership, a free trade agreement initiated by the U.S. that will lower non-tariff and tariff barriers to trade.

Another factor could also be that Vietnam recently removed thousands of business requirements and red tape to make it more foreign investment-friendly.

The annual ASEAN Business Outlook Survey also revealed that 40 percent of U.S. enterprises prioritized Vietnam for future business expansion thanks to the stability of the country’s long-term planning.