Business and start-ups in Vietnam: Baker McKenzie M&A Practice Head Seck Yee Chung shares a veteran’s view

What is the start-up scene like in Vietnam? How do businesses navigate an ever-evolving regulatory landscape? Yee Chung sheds light on the dynamism of Vietnam’s business landscape and the opportunities present for investors looking to leverage opportunities in this emerging market.

By SGN | 22 Sep 2020

Vietnam has become a hotbed for foreign investment across service industries ranging from education, technology and healthcare to real estate and hospitality. (Image source: KrAsia)

Tell us a little about what you do.

I head up the M&A practice of Baker McKenzie in Vietnam. Broadly speaking, I advise and support M&A and foreign investments into Vietnam across sectors from manufacturing to services. From an industry perspective, my focus is on technology and healthcare.

We are also active in regulatory reform work so to as enhance the clarity and quality of the laws. We work closely with many industries to examine draft regulations and share feedback and suggestions. We collaborate with businesses and regulators to create an environment that is facilitative to investment and business, and also ensuring that these laws are fair, transparent and structured to protect consumers.

Seck Yee Chung leads Baker McKenzie’s Mergers & Acquisitions, TMT, and Pharmaceutical and Healthcare Practices in Vietnam. He serves as Vice-President of the Singapore Business Group, as well as AmCham’s Digital Economy Sub-Committee Vice-Chair. Connect with him here.

What brought you to Vietnam 20 years ago?

I left Singapore for Myanmar in 1997, where I was for a year. After Myanmar, I came to Vietnam, and eventually joined Baker McKenzie in 1999, and I’ve been with the firm ever since.

Whilst proudly Singaporean, I was also looking for a different experience. When these emerging market opportunities came up, I thought why not? Each country has its unique history that you read about and watch in movies, but it’s always different when you experience it for yourself. I saw it as a chance to experience adventure and a different way of life from Singapore.

We understand that your areas of focus are technology and healthcare. Tell us a little about what these landscapes are like in Vietnam?

Vietnam is open for business. They’re open to foreign investments and want to grow their domestic champions as well. Vietnam follows the well-trodden path of countries in the early days of opening up to foreign direct investment (FDI) – in particular in investments in manufacturing products for exports. Having started this journey in the early 1990s, what Vietnam was good at and became well known for are garments, aquaculture, agricultural products and then furniture.  

Today, it’s much more varied. The biggest export is the electronics category – given the big investments that Samsung and Intel have injected into Vietnam.  

There has also been growing foreign investment into services, from education and technology, trading and distribution, to financial services and advertising – and of course, healthcare, real estate and hospitality. And in more recent years, we see significant investments in renewable energy, in particular wind and solar, and also the digital economy, such as in fintech, digital media, and e-commerce.

The big push to facilitate all of this is when Vietnam joined the WTO in 2007. The benefit for Vietnam is that a lot of products can go into key export markets with lowered tariff rates; and in return, Vietnam opened its doors for trade, distribution, advertising and whole range of other services.

On the technological and digital side of things, this is where it’s been a really interesting evolution. In the earlier days, back in 2007, a lot of focus was put on telecoms. Fast forward to today, the story of the day is internet and web-based, digital and mobile products and services – which dovetails with the government’s vision of smart cities and IR4.0, and scaling the production value chain.

In terms of healthcare, Vietnam had eventually paved the way for long-awaited foreign invested drug import companies; and foreign investment in healthcare services and products, from hospitals to medical devices and pharmacies, continues. This is a highly regulated sector (for very understandable reasons) and where regulatory reform efforts are active.

Vietnam continues as well to enter into other multi-lateral agreements (such as the CPTPP and EVFTA) so as to enhance its trade and investment relations in the region and globally.

Around 70 per cent of Vietnam’s e-commerce sales are conducted in Hanoi and Ho Chi Minh City. However, rural internet connectivity has greatly improved in recent years and this has created a great opportunity for e-commerce platforms to target the country’s biggest population. (Image source: e27)

Tell us more about the growth of Vietnam’s digital economy.

Vietnam has a significantly sized population that is young, tech-savvy, and incredibly aspirational. This attracts FDI and creates a compelling domestic market, and has fuelled the rise of the digital economy.

Services in Vietnam are now increasingly skewed towards the digital space. According to the e-Conomy Southeast Asia report of 2019, Vietnam’s internet economy is growing at 40 per cent, which makes Vietnam a market leader alongside Indonesia in Southeast Asia. From an FDI and regulatory point of view, this is interesting because when Vietnam joined the WTO in 2007, the digital economy was in its infancy, but which has been striding forward ever since.

Regulations have been developing around this space over time, and in particular, to address what foreign investors could or could not do, and to fill in gaps in legal frameworks to regulate new business models.

Take e-wallets for example. While Vietnam do have regulations around intermediary payments services (IPS), these were silent on the level of foreign ownership. Regardless, foreign investors started to invest into Fintech and e-wallet solutions. Once interest grew and foreign investments started to tip into majority, questions about whether they were permitted to do so began to come up.

There are currently 30 licensed non-bank payment intermediary services in the country, with around 20 of these offering e-wallets, according to the Nikkei Asian Review. MoMo, one of Vietnam’s favourite e-wallets, stands as the market leader with an estimated 10 million users. (Source:

In response, the government had come up with draft regulations in late 2019 proposing that foreign investment should be capped at 49% of the charter capital of an IPS company. The industry players and investors gave their feedback around how such a restriction would not be compatible with Vietnam’s agenda and vision to grow the digital economy – and such restriction was reportedly dropped from the 2020 version of the draft regulation.

In recent years, Indonesia has seen an exponential increase in funding for start-ups from foreign investors. Do we see a similar phenomenon happening in Vietnam? What is the start-up scene like?

The start-up scene in Vietnam is very vibrant. The e-commerce sector is worth about US$2.8 billion, with an annual growth rate of 87 per cent. Vietnam is also one of the fastest growing economies in the region and is expected to increase by 18 million middle-class households in 2017-2030, more than 30 per cent of whom will be living in Hanoi and Ho Chi Minh City (Vietnam Investment Review, 2019)

What’s particularly interesting is the local start-ups which have emerged as up-and-coming champions. They are in different stages of maturity, with some in their early rounds of venture capital (VC) funding and others in their third round or so where private equity (PE) investors are coming in.

Two well-known local start-up champions are B2C e-commerce platform Tiki and e-wallet MoMo. MoMo has emerged as the only Vietnamese representative in the Fintech 100 report (2019) ‘Leading 50’ category ranked 36th, the first time a Vietnamese company has broken into this group. MoMo grossed over 8 million customers and had a growth rate of 15% in monthly transaction volume and user base., the Chinese e-commerce platform that rivals Alibaba, has become the largest shareholder in Vietnam e-commerce platform Tiki, demonstrating a strong commitment to one of Southeast Asia’s fastest-growing e-commerce market. (Source: KrAsia)

It is also interesting to look at who the investors are in these start-ups. They could be anyone from VC/PEs to corporates – and in particular, the phenomena of the mega Chinese tech companies that are actively investing into SE Asia.

For example, in 2018, Alibaba increased its shareholding in Lazada, its e-commerce marketplace in SE Asia which Alibaba acquired control of in 2016, by way of injecting another US$2 billion into the business.

The growth in e-commerce also drives growth in another sector, being the logistics, warehousing and delivery sector.

How has the business and legal landscape changed in Vietnam over the last 10 years?

The landscape has changed dramatically – in particular with the outbreak of COVID-19.

As you know, at this time of the COVID-19 pandemic, Vietnam has invested lots of time and energy into understanding, reacting and putting in measures to address public health issues. This doesn’t mean that attention to the economy and development of regulatory frameworks have taken a backseat.

Vietnam have recently issued new investment, corporate, and private-public partnership laws which will take effect in 2021. There is a new merger control regime that recently took effect and is more encompassing in the deals that are captured. And there are draft digital economy regulations in the works that regulate a broad range of activities, from e-commerce to mobile advertising. 

It shows that Vietnam continues to reform its laws and one can’t take for granted that things will stay static. In particular and for example, legal frameworks are put in place to both initiate and regulate the renewable energy and digital economy sectors, which were near non-existent 10 years ago.

On a broader note, there is much recognition for the Vietnam government for creating a stable socio-political environment, even during this challenging time with the pandemic. With a stable environment, people feel more confident to invest, settle down with families and make big-ticket purchases such as housing. These facilitate the growth of companies and domestic champions, including enabling the start-up scene, and makes Vietnam attractive enough for different clusters of investors to come in.

What are business sentiments like now, in wake of the COVID-19 situation?

The COVID-19 pandemic has impacted all sectors – of course with international travel and the hospitality industry taking early and substantial hits; and with reduced social and commercial activities and consumer spending, this has a knock-on effect for both local and global economies.

Vietnam’s swift reaction in putting in place stringent and early measures, from travel restrictions, social distancing, to mask wearing and contact tracing, combined with clear messaging from the government and cooperation of the population, has generated a lot of goodwill for Vietnam as it demonstrated its commitment and capacity to manage this difficult scenario.

Vietnam’s economy of 2020 will not be the same as pre-COVID-19 years, but we are still seeing some growth. However, nobody can succeed in isolation. Even if Vietnam is keeping its house in order and certain sectors, like education and e-commerce, continue to see domestic spend, overseas demand and international commerce, and international travel, needs to be restored for the economy to return to previous levels. Even if we see supply chains shifting to Vietnam, the factories and thousands of workers looking to produce and export Vietnam-made goods are reliant on overseas demand. If key trading partners are struggling and their spending is down, this will impact Vietnam’s export sector.

Are there any tips when it comes to building relationships with Vietnamese people? What are some cultural norms for example (especially those that non-Vietnamese wouldn’t be familiar with)?

Vietnam has an open-hearted and open-minded culture. Much as there is pride to uphold a strong national identity borne of resilience, there is also genuine interest to understand and adapt to new ideas, the desire to modernise, and to be recognised by the international community.

Of course, there may be a language barrier factor – but, essentially, if you want to know someone, be sincere and respectful, show that you’re willing to put in the time, and it is not uncommon to quickly have open conversations around family and personal experiences.

Semi-social spaces such as bars, restaurants and hotels offer potential to replace the social network that was previously built around the office.

Mutual respect is also very important. In business dealings, show that you’re forthcoming and candid. But also keep a sense of humour to ease tension – chances are, they’ll rather have a beer with you to build relationships (any time of the day!).

It’s also important to appreciate that we are operating in a different country, and cultural and business norms of Vietnam would not be identical to the norms in Singapore. I had to learn about a new environment and a different legal system, and be adaptable to different ways of doing things.

What do you do in your free time in Vietnam?

First and foremost, that would be spending time with family. Domestic travel had started to pick up in Vietnam around July. We had wanted to go to Da Nang for a family vacation, but had to switch to Cam Ranh as accommodations in Da Nang were full.   It turned out to be a close shave as the second outbreak originated from Da Nang at the time of our trip – but that was quickly managed too. We also continued on our second leg of the trip, being Ha Long Bay, albeit cut short by two days as travel restrictions were being introduced around the same time.

Ha Long Bay is a popular tourist attraction known for its emerald waters and towering limestone islands.

Overall, the lifestyle in Vietnam is good. Fortunately, because of the measures imposed to manage the second outbreak, bars and restaurants are running again, and schools are open. Also, domestic travel is still an option for us, including enjoying cold weather in the north toward the end of year. Reportedly, Vietnam will also start to ease on international travel restrictions. In these uncertain times, both professionally and personally, these are things I do not take for granted.

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