The leather-footwear industry is among the key export sectors attracting M&As in recent years (Photo: VNA) - Several of Vietnam’s key
export sectors, such as textile-garment, leather-footwear, and electronics have
become magnets for merger and acquisition (M&As) activities, posing a risk
of leading enterprises in those sectors being purchased by foreign investors.
An advantage of Vietnam’s textile-garment
industry is low labour costs, and it was also identified as one of six sectors on
a list of supporting industry products prioritised for development.
The country has become the “footwear factory” of
the world, while the domestic market boasts a population of more than 96
million.
Vietnam is also establishing itself as the
world’s electronic manufacturing hub, with FDI continuing to flow into the sector
over recent years.
Tran Phuong Lan, an official from the Vietnam
Competition and Consumer Authority at the Ministry of Industry and Trade
(MoIT), said that apart from existing development potential, opportunities created
by bilateral and multilateral free trade agreements (FTAs) have also fuelled
those industries’ development.
For example, she noted, under the EU-Vietnam FTA
that took effect on August 1, 2020, 42.5 percent of import tariffs on textile-garment
products were immediately eliminated, while those on leather-footwear items
will be gradually cut to zero percent. The Comprehensive and Progressive
Agreement for Trans-Pacific Partnership (CPTPP), which came into force on
December 30, 2018, abolished tariffs on Vietnam’s textile-garment products exported
to other member countries.
A recent study of COVID-19’s impact on certain main
industries in Vietnam noted that there have been signs of M&As surging in the
textile-garment, footwear, and electronics sectors over the last three years.
In 2018, Japan’s Itochu Corporation spent 47
million USD on purchasing nearly 10 percent of shares in the Vietnam National
Textile and Garment Group (Vinatex), raising its stake to almost 15 percent and
becoming the second-largest shareholder, after MoIT.
Notable M&A deals last year included the one
between the Taekwang MTC Vietnam Co. Ltd and the Jin Heoung Vina JSC in the
leather-footwear industry, and the one between the Zenith Electronics LLC and
Luxoft USA Inc. in the electronics industry.
Investors from the Republic of Korea, who have
continually conducted large-scale M&A deals in Vietnam, also tend to select
sectors with potential, like textile-garment, leather-footwear, and
electronics.
Economic experts cited the experience of other
countries as showing that to ensure effective M&A activities and protect the
interests of all sides involved it is necessary to perfect related legal
regulations, especially those on information transparency, and set up a regular
consultative mechanism between the MoIT and the Ministry of Planning and
Investment to develop an M&A database for key industries like
textile-garment, leather-footwear, and electronics.
Vietnamese enterprises should proactively
diversify technical solutions to keep information transparent, identify their
targets in M&A deals, and analyse partners to avoid risks during
negotiations.
In particular, experts noted, in M&As
involving foreign firms, businesses should have a good grasp of market
information and carefully assess foreign investors regardless of the deal’s
value.
Nguyen Thi Tong, former Vice Chairwoman and
former Secretary-General of the Vietnam Leather, Footwear and Handbag
Association, recommended that as the leather-footwear and handbag sector is one
of Vietnam’s five key export industries, businesses should make proactive moves
to boost their capacity and cooperation via M&As within their sector, to
secure sustainable development./.