Singapore, Indonesia and Vietnam lead charge in Southeast Asia, say lawyers

Foreign investment in Southeast Asia
From left to right: Steven Tran, Lip Kian Ang, Eduardo Ramos-Gómez

Singapore, Vietnam and Indonesia are among Asean countries leading the charge to attract foreign investment as growing consumer markets and rising global trade tensions have seen businesses shift their eyes to Southeast Asia.

Private equity and M&A specialist Steven Tran, a Singapore-based partner at Morrison Foerster, noted that the three jurisdictions are the most active in Asean in terms of private equity and venture capital.

“When we look back at the deals that we closed in this region since 2020, a significant number of them involved companies with headquarters or core business operations in Singapore, Indonesia, or Vietnam,” Tran told Asia Business Law Journal.

“We saw a lot of transactions in tech, including fintech, healthtech, and e-commerce. And while technology was unquestionably the most active sector for PE and M&A deals in the region in recent years, logistics, industrials, life sciences, and healthcare were also sectors that featured prominently on our deal flow during the past three years.”

Tran observed that such trends are based on the fast digitalisation in Southeast Asia, with digital adoption reaching 75% of the total population of almost 700 million people in the region, and that number is growing. Within the region, Tran noted that Singapore, Indonesia, and Vietnam account for the largest share of the total tech deals during the past two years in terms of deal value and deal count.

The emerging middle class with growing purchasing power has translated into demand for better quality healthcare and products, said Tran’s colleague, Singapore-based partner Ang Lip Kian.

“Businesses like private hospitals, telemedicine, remote consultation, micro-distribution of medicine and medical devices, and also disciplines such as ophthalmology, oncology, paediatrics, maternity, and dental have all attracted interest from investors,” said Ang.

Singapore is receiving a lot of attention because of the development of the life sciences hub initiative from the government, complemented by an array of incentives, opportunities for collaboration, support and infrastructure available for companies that participate in the ecosystem.

“From my observation, deal flow started picking up a couple of years ago and continues unabated today. The life sciences businesses that are receiving investments range from drug discovery, research and development to virology, vaccines and therapeutics,” Ang added.

“Despite the challenging market conditions, these cutting-edge life sciences businesses tend to have more resilient valuations because, among other reasons, they are longer-term plays using proprietary IP that others do not have.”

Eduardo Ramos-Gómez, the managing partner at Duane Morris & Selvam, a joint law venture of international law firm Duane Morris and Singapore-based Selvam, also saw Singapore, Vietnam and Indonesia as the emerging regional powerhouse, especially with Indonesia’s Asean chairmanship until the end of 2023.

The Foreign Investment Agency of Vietnam expected the country to attract USD36 billion to USD38 billion in foreign direct investment this year, up from nearly USD22.4 billion in 2022.

Singapore’s strategic location as a gateway to Southeast Asia and growing importance as a commercial hub for the region has established itself as a stable jurisdiction with a strong regulatory framework, which makes it an attractive destination for international law firms establishing a presence in the island state.

“Our growth strategy is to grow Singapore here in Asia, to grow London in Europe, and then to grow our centres in the US, including Northern California, Texas, Chicago and New York,” Ramos-Gómez told Asia Business Law Journal.

Looking at the firm’s Singapore-based revenue several years ago, Ramos-Gómez found almost 90% came from assisting financial institutions and from important sectors, including technology, telecommunications, infrastructure and construction, health and life sciences, and consumer products.

“Energy is another that’s part of our infrastructure segment that we’re so strong in and that dovetails well with what’s going on here in Asia,” said Ramos-Gómez. “Financial institutions’ projects include private equity fund formation, capital markets, M&A, and insurance and reinsurance.”

With the current trade tensions, Ramos-Gómez also noticed Latin America has become a rising destination for Chinese investment, especially Mexico.

“Latin America has been receiving a lot of outbound Chinese investment, not only American investment redeploying it back into the US or Mexico but also Chinese entities, including Taiwanese entities, moving into Mexico through subsidiaries in the US,” said Ramos-Gómez.

“Mexico’s proximity to the US and its free-trade agreement are really being considered by North Americans, especially for the automotive industry, in which Mexico continues to make strides and be the biggest manufacturer and exporter of automobiles.”