Instead of setting up new companies, in recent years foreign investors have preferred to invest in or buy existing businesses, enabling them to hit the ground running in the lucrative market. There has been a sharp increase in acquisitions this year, especially as cash flows dry up for local businesses amid the pandemic.
In the first four months of the year, the number of newly-registered FDI projects decreased by nearly 10 percent year-on-year, but the number of companies in which foreign investors acquired shares rose by 33 percent, according to the Ministry of Planning and Investment.
There were more than 2,600 acquisitions for $1.6 billion without any increase in charter capital and 580 transactions in which the capital increased by $0.9 billion. Japan ranked first with acquisitions of $743 million, followed by South Korea ($356 million) and Singapore ($333 million).
Ho Chi Minh City-based companies were the biggest targets, accounting for more than half the transactions. Stake acquisitions accounted for nearly 80 percent of the registered FDI in HCMC in the four-month period, Ho Chi Minh City Statistics Office data shows.
Investors have been especially interested in manufacturing, which saw 822 deals worth more than $1 billion, wholesale, retail and automobile and motorbike servicing, which attracted a total of $500 million.
Minister of Planning and Investment Nguyen Chi Dung said acquisitions would increase further, with promising businesses snapped up at cheap prices.
Nguyen Tien Loc, chairman of the Vietnam Chamber of Commerce and Industry (VCCI), also said foreign companies and investment funds are considering acquiring real estate, retail and other companies, many of which are facing difficulties and are even on the verge of bankruptcy.
Citing this, in a recent meeting he petitioned Prime Minister Nguyen Xuan Phuc to temporarily stop acquisitions during the pandemic.
Do Nhat Hoang, head of the Ministry of Planning and Investment's foreign investment agency, told VnExpress his department had warned about just this two months ago and urged the government to refer to measures taken by other countries to protect domestic enterprises.
But Vietnam should only restrict the acquisition of major enterprises only, he said.
Many countries are similarly concerned that foreign investors would take advantage of plunging valuations and problems of businesses to acquire them cheaply.
Countries such as Italy, Germany, Spain, and India have placed curbs on foreign acquisitions and are even considering buying shares of major and key companies themselves.