The leather-footwear industry is among the key export sectors attracting M&As in recent years (Photo: VNA) An advantage of Vietnam’s textile-garmentindustry is low labour costs, and it was also identified as one of six sectors ona list of supporting industry products prioritised for development.
The country has become the “footwear factory” ofthe world, while the domestic market boasts a population of more than 96million.
Vietnam is also establishing itself as theworld’s electronic manufacturing hub, with FDI continuing to flow into the sectorover recent years.
Tran Phuong Lan, an official from the VietnamCompetition and Consumer Authority at the Ministry of Industry and Trade(MoIT), said that apart from existing development potential, opportunities createdby bilateral and multilateral free trade agreements (FTAs) have also fuelledthose industries’ development.
For example, she noted, under the EU-Vietnam FTAthat took effect on August 1, 2020, 42.5 percent of import tariffs on textile-garmentproducts were immediately eliminated, while those on leather-footwear itemswill be gradually cut to zero percent. The Comprehensive and ProgressiveAgreement for Trans-Pacific Partnership (CPTPP), which came into force onDecember 30, 2018, abolished tariffs on Vietnam’s textile-garment products exportedto other member countries.
A recent study of COVID-19’s impact on certain mainindustries in Vietnam noted that there have been signs of M&As surging in thetextile-garment, footwear, and electronics sectors over the last three years.
In 2018, Japan’s Itochu Corporation spent 47million USD on purchasing nearly 10 percent of shares in the Vietnam NationalTextile and Garment Group (Vinatex), raising its stake to almost 15 percent andbecoming the second-largest shareholder, after MoIT.
Notable M&A deals last year included the onebetween the Taekwang MTC Vietnam Co. Ltd and the Jin Heoung Vina JSC in theleather-footwear industry, and the one between the Zenith Electronics LLC andLuxoft USA Inc. in the electronics industry.
Investors from the Republic of Korea, who havecontinually conducted large-scale M&A deals in Vietnam, also tend to selectsectors with potential, like textile-garment, leather-footwear, andelectronics.
Economic experts cited the experience of othercountries as showing that to ensure effective M&A activities and protect theinterests of all sides involved it is necessary to perfect related legalregulations, especially those on information transparency, and set up a regularconsultative mechanism between the MoIT and the Ministry of Planning andInvestment to develop an M&A database for key industries liketextile-garment, leather-footwear, and electronics.
Vietnamese enterprises should proactivelydiversify technical solutions to keep information transparent, identify theirtargets in M&A deals, and analyse partners to avoid risks duringnegotiations.
In particular, experts noted, in M&Asinvolving foreign firms, businesses should have a good grasp of marketinformation and carefully assess foreign investors regardless of the deal’svalue.
Nguyen Thi Tong, former Vice Chairwoman andformer Secretary-General of the Vietnam Leather, Footwear and HandbagAssociation, recommended that as the leather-footwear and handbag sector is oneof Vietnam’s five key export industries, businesses should make proactive movesto boost their capacity and cooperation via M&As within their sector, tosecure sustainable development./.
VNA
