With its 3Q2024 GDP growth of 7.4% y-o-y reported in early October, Vietnam remains on track for continued economic growth driven by its strong manufacturing sector, exports, foreign direct investments (FDIs) and its role in the China+1 strategy.
“Vietnam’s GDP growth in 2023 was 5.05%, while the economy expanded by 6.42% in the first half of 2024. These were mostly driven by the recovery in manufacturing and services,” notes United Overseas Bank U11 (UOB) Vietnam CEO Victor Ngo, who adds that the bank is seeing “good business opportunities” across a broad base of sectors, including clean energy, infrastructure, technology, construction and agriculture.
As Vietnam continues its growth trajectory, UOB Vietnam will likely benefit too. The bank, which has been in the country since 1993, plays a “crucial role” in helping businesses invest in Vietnam and overcome the challenges of entering the Vietnamese market, says Ngo. “Over the past five years, UOB Vietnam has supported about 300 companies to invest in the country, contributing an estimated $7.3 billion in investments and facilitating the creation of about 50,000 job opportunities,” he shares.
UOB Vietnam’s contributions include close collaborations with Vietnam’s government agencies and strategic initiatives to help facilitate FDIs flowing into the country. These functions are carried out through UOB Vietnam’s FDI advisory unit, established in 2013, to provide end-to-end support for foreign investors. Some of these services include trade finance solutions, working capital loans and strategic partnerships with local authorities to help clients navigate regulatory requirements efficiently.
Robust pipeline of FDIs
Vietnam’s appeal as an investment destination continues to be strong, with realised FDIs hitting a record high of US$23.2 billion ($30.53 billion) in 2023, surpassing its previous high of US$22.4 billion in 2022.
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In 1H2024, FDIs into Vietnam grew by 13.1% y-o-y, nearly reaching US$15.2 billion, according to the Vietnam General Statistics Office. As of June, Vietnam’s realised FDI amounted to US$10.8 billion year-to-date, more than double the US$4.6 billion worth of inflows in the first quarter of 2024, says Ngo.
“We can expect realised FDIs to pick up pace in line with the growth recovery in the second half of the year,” he tells The Edge Singapore. “As usual, the manufacturing and processing sector accounted for the bulk of the FDI in the second quarter of 2024 with a share of about 70%. Singapore remains the largest source of FDI inflows for Vietnam, way ahead of Japan, Hong Kong and South Korea.”
He adds that he sees strong interest in sectors such as manufacturing, technology, renewable energy and infrastructure, all of which are “particularly promising” for FDIs in the near future. Geographically, the country is also seeing emerging provinces and cities such as Bac Ninh, Quang Ninh from the north and Dong Nai and Ba Ria-Vung Tau in the south, gaining traction in addition to the “key investment hubs” of Ho Chi Minh City and Vietnam’s capital city, Hanoi.
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Vietnam’s economic landscape
Even though Vietnam is still seeing growth, the country is not immune to risks such as higher inflation and currency volatility. In the first eight months of 2024, Vietnam’s consumer price index increased by 4.04% y-o-y, due to the revival of domestic spending. However, Ngo says the bank “remains confident” in the stability of the economic environment, further noting that the increase is well within Vietnam’s official target ceiling of 4.5% for the year.
UOB Vietnam CEO Victor Ngo. Photo: UOB
“This movement and the continued focus on supporting economic growth might see the State Bank of Vietnam [SBV] proceeding cautiously with regard to changing its policy rates,” he says.
On currency fluctuations, Ngo notes that the SBV has been actively conducting foreign exchange interventions, which has helped to stabilise the Vietnamese dong (VND) against the US dollar (USD).
Vietnam’s robust growth momentum, driven by its manufacturing rebound, strong trade surplus and solid FDI inflows, also looks set to extend into the second half of 2024, supporting expectations of renewed strength for the VND.
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Despite UOB Vietnam’s confidence, Ngo notes several risks have emerged in the last two years, including the slower-than-expected economic recovery in China, a “considerable” economic slowdown in the US and the EU, as well as a “persistently sluggish” property market in Vietnam.
However, he adds that the bank’s “prudent underwriting standards” and diversified and sound customer base will give it “additional buffers” against any potential economic headwinds.
Navigating Vietnam’s trade openness and global supply chains
Vietnam’s role as a hub for global supply chains is growing stronger. The country accounted for 18% to 19% of Asean’s total trade value in 2022 and 2023, placing it second after Singapore. While this trade openness presents opportunities, it also exposes the country to fluctuations in external demand.
Ngo acknowledges these risks but believes UOB Vietnam is well-positioned to manage them with its portfolio of customers, which spans the key sectors of the Vietnamese economy — industrials, consumer goods, construction and infrastructure, energy and chemicals, technology, media and telecommunications, real estate, and hospitality and healthcare.
Going digital
As the Vietnamese population increasingly rely on digital finance platforms, UOB Vietnam is building its digital capabilities, in line with Vietnam’s consumer behaviour trends.
According to a Decision Lab report titled The Rise of Social Commerce for the 4Q2023, the Vietnamese population use e-wallet brands and banking apps when it comes to their use of digital finance platforms. As at the time of the report, MoMo, a digital wallet app, was found to be the most used digital finance platform. Banks’ in-house apps ranked fifth among the six options given, which includes Sea’s ShopeePay.
“The retail banking business model in Vietnam is being reshaped. More banks are now investing in better digital banking capabilities to grow their businesses. In 2023, more than 40 banks in Vietnam had electronic ‘know your customer’ systems for account opening, and about 27 million bank accounts were opened digitally,” Ngo notes.
As such, the bank is already working on its “robust digital-led growth strategy”.
“We are now in the execution mode where our capabilities will be delivered in phases. For instance, we are building digital capabilities such as digital account opening, and portfolio insights to offer personalised benefits to our customers,” says Ngo.
The bank is also planning to launch its UOB TMRW digital banking app by 2025. The app is already available in the rest of UOB’s Asean markets: Singapore, Malaysia, Thailand and Indonesia. The app is expected to have full digital capabilities such as digital onboarding for cards and a chatbot service by 2025 or 2026.
Citi integration
After completing the acquisition of Citi’s consumer banking business in Vietnam in March 2023, UOB Vietnam is currently working on developing its systems to support the migration of customer portfolios onto UOB’s platforms in 2025. In early 2022, UOB announced that it had agreed to acquire Citi’s retail businesses in Malaysia, Thailand, Indonesia and Vietnam for $4.92 billion. Vietnam is the last region to be integrated. Full integration is expected to be completed by the end of 2025.
“Upon the completion of the acquisition of Citi’s portfolio, we now have a comprehensive product suite to offer customers. These products include term deposits, credit cards, personal loans, mortgages, bancassurance and unit trusts,” says Ngo.
The affluent market
Vietnam is a “key strategic market” with long-term potential growth with the country’s economic growth resulting in an expanding affluent population.
“The country has one of the fastest-growing millionaire populations in the world, fuelled by the booming real estate, manufacturing and technology sectors. With this growth, there is rising demand for wealth management, investment advisory and specialised banking services,” says Ngo.
“To compete effectively against many peers in the market, we need to continue to enhance our product offerings and services to cater for ever-changing customers’ needs, especially the affluent segment,” he adds, highlighting the bank’s “strong connectivity” within Asean, its digital capabilities as well as special privileges and benefits tailored to its affluent clients’ lifestyles.
Sustainability and green finance
Sustainability is another key area of focus for UOB Vietnam. The bank has introduced several green financing initiatives, including its green trade finance and sustainability link loan programmes. These initiatives aim to promote environmentally sustainable practices and support Vietnam’s transition to a low-carbon economy. The bank has already financed 17 renewable energy projects so far.
“Our goal in Vietnam is to be a catalyst for green growth, providing innovative financial solutions that enable businesses to adopt sustainable practices. We are particularly focused on sectors with high potential for environmental impact such as renewable energy, sustainable manufacturing and agriculture,” says Ngo.
In it for the long haul
After being in Vietnam for over 30 years, UOB remains “committed” to Vietnam and is here for the long term, says group CEO Wee Ee Cheong at the bank’s Gateway to Asean conference in Ho Chi Minh City, Vietnam on Sept 6.
“Vietnam has been one of the fastest-growing economies in Southeast Asia with promising potential. The macro fundamentals are favourable [with Vietnam’s] young population, skilled workers and abundant natural resources. It is a beneficiary of global supply chain shifts and free trade pacts,” Wee added at the time.
To Ngo, businesses can expect to see a “wealth of opportunities” in the fast-evolving Vietnamese market as the country continues to cement its role as a gateway to Asean.
William Fung, group deputy chairman of the Hong Kong-based Fung Group, observes that the local Singaporean banks will have “a lot more insight” into what’s happening in Asean.
“They’re here, they’re local and they know all the players,” said Fung in a separate interview in September. “And [with] Asean getting more important, as we see more and more of the supply chain moving into Southeast Asia, [the region] is becoming a very important area for us in terms of supply.”
