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Overview of economic concentration

22 January 2016
News Vietnam

In the last 5 years, the economic concentration activities in Vietnam grew by 30% on average. This situation reflects an open economy with the participation of many economic sectors and an increase in the economic concentration activities consequently increase as an objective fact. However, that also have potential constituents establishing a dominant business which can affect to the competitive environment. Therefore, in recent years, VCA has been actively performing the task of monitoring and controlling activities to prevent timely and minimize the negative impact of some transactions to the market . In the period 2012 - 2014, VCA has processed 19 notified cases about economic concentration and a lot of consultation before and during implementating economic concentration.

The increase in foreign direct investment and attracting capital from abroad when the Free Trade Agreements concluded negotiations and came into force as TPP, Vietnam – EU FTA, RCEP, ... Along with the opening of the market and opportunities due to the free trade agreements bring in business, M&A will be taken place more and more. Because the economic concentration is a potential way to attract foreign investment effectively. On the other hand, from the perspective of domestic enterprises, the demand of concentration of resources is inevitable and necessary to improve competitiveness in the context of economic integration increasing broadly. Meanwhile, economic concentration is considered to be the shortest road to solve above problems. Therefore, with upward trend of M&A of large enterprises, M&A cases under control subjects will also increase.

Along with that trend, the formation of the ASEAN Economic Community (AEC) in 2015 will also be an added element of M&A activity in Vietnam conducted by big investors in ASEAN like Thailand, Malaysia, ... According to the HSBC bank’s forecast, retails, manufacturing, banking and telecommunication sectors will attract big groups of countries in the region (Thailand, Singapore, Malaysia, ..) to enter Vietnam market through M&A activities. This trend can be evidenced with the case that BJC plans to acquire Metro Vietnam or a Thailand corporationhas gradually acquired Cotec Construction JSC by purchasing shares on the Stock Exchange.

In terms of structure of M&A, if in the period before foreign elements accounted for 66% in value and 77% in the number of economic concentration transactions in Vietnam, from 2012 to 2014, foreign elements have accounted only high proportion of the transaction value about 68%, the proportion of the number of transactions has fallen below 30%. Thus, deals involved local firms are majority with 75%. In addition, some Vietnam enterprises began to implementoverseas cases (eg Vinamilk, Viettel, FPT). However, the mainstream is still the wave of acquiring domestic enterprises by foreign companies.

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