After more than 3 months being affected by the epidemic, many Vietnamese businesses are currently in “half-dead” situation, several of which have to cease operations or are on the verge of bankruptcy.
One of the biggest difficulties that businesses are facing is the shortage of capital, especially working capital. Over 45% of enterprises are in shortage of capital for production and business activities. Notably, there have been many merger and acquisition (M&A) deals. A lot of foreign investors have taken advantage of the epidemic to acquire many Vietnamese enterprises in the form of capital contribution and share purchase. Instead of spending a lot of time and resources to register new direct investment capital, this approach helps foreign enterprises penetrate the Vietnamese market faster and easier.
According to statistics of the Foreign Investment Agency (MPI), in the first four months of the year, the total newly registered and added capital, as well as capital contribution and share purchase of foreign investors reached USD 12.33 billion, equivalent to 84.5% of that in the same period in 2019.
Although newly registered and adjusted capital increased compared to the same period, capital contribution and share purchase of foreign investors decreased sharply, reducing the total investment capital. Specifically, foreign enterprises spent USD 2.5 billion investing in Vietnam through capital contribution and share purchase in domestic enterprises in the first month of 2020, equivalent to only 34.7% of that in the same period in 2019.
Japan, China, and South Korea are the three countries with a 40% increase in share purchases and capital contribution to Vietnamese enterprises. In terms of deal value, Japan ranked first with USD 743 million, followed by South Korea (USD 356 million), Singapore (USD 333 million) and China (USD 230 million), etc.
Industries that foreign investors pay attention to are really potential, including processing and manufacturing industries with 822 deals, worth more than USD 1 billion; wholesale, retail, repair of automobiles and motorbikes with more than 1,000 deals, worth over USD 500 million, etc.
Mr. Do Nhat Hoang - Director of Foreign Investment (Ministry of Planning and Investment) said that the Covid-19 pandemic is an opportunity for foreign investors to acquire businesses that are "vulnerable". Not only Vietnam but many countries around the world are also worried that foreign investors may take advantage of plunging stocks and unstable markets to acquire key businesses at low prices.
However, Mr. Hoang believed that the contribution of capital and purchase of shares in average businesses should be allowed to take place naturally, but with businesses operating in the core and strategic industries, which have huge impacts on society, this needs controlling.
According to Head of Ministry of Planning and Investment - Nguyen Chi Dung, disruption in supply chain cannot be solved immediately, which will continue to affect many businesses. There will be more and more M&A deals in the coming time, leading to the risk that potential Vietnamese enterprises may be acquired at cheap prices.
Facing that situation, in order to protect domestic enterprises, VCCI President Vu Tien Loc has made a petition to the Prime Minister. Accordingly, Mr. Loc proposed a plan to temporarily stop the merger and acquisition activities in the period of epidemic outbreak to limit foreign enterprises' acquisition of Vietnamese businesses.
Some economists say that in the context of integration and opening, it is normal for domestic businesses to invite investors to buy shares, but if the offer is too generous, chances are high that businesses will be acquired. The selection of industries calling for investment must be accompanied by the provisions of the investment rate of FDI enterprises in order to have reasonable control over the rates, which can be adjusted according to the market's supply and demand.
The Government should have policies and plans to attract investment. Sectors that can cause political, economic and social risks need to be controlled. In the current context, Vietnam should both focus on attracting foreign investment, and proactively protect domestic businesses and avoid unreasonably annexed enterprises. On the other hand, it is advisable to create conditions for a number of large Vietnamese corporations and enterprises to gather and acquire foreign enterprises in high-tech and high-value-added fields.