In the “China plus one” shift, Singapore’s Keppel is going after Vietnam

Singapore’s Keppel Corporation is pursuing expansion opportunities in emerging economies such as Vietnam, which is gaining pace as a manufacturing base for investors trying to diversify away from China.

In an interview with Nikkei Asia, the CEO of the company, Loh Chin Hua, stated that enterprises have adopted a “China plus one” approach in an effort to diversify investments away from the mainland in favor of alternate locations in order to decrease concentration concerns.

When U.S.-China trade tensions increased under former U.S. President Donald Trump, diversification increased. During the COVID-19 outbreak, China’s strict lockdown regulations hindered industry and encouraged investors to reconsider their reliance on the second-largest economy in the world.

“Several multinationals, particularly IT businesses, have begun manufacturing operations in Vietnam and are evaluating the country as a prospective manufacturing base,” Loh explained. We anticipate being in an excellent position to invest considerably more in that nation.

Keppel Land stated last year that its subsidiary Keppel Land Vietnam Properties had reached an agreement with Phu Long Real Estates Joint Stock Company and An Khanh New City Development Joint Venture to purchase a 49% stake in three residential property parcels.

The site in Hanoi was purchased for 119 million Singapore dollars ($159.7 million). Keppel and its Vietnam partner intend to construct around 1,260 dwellings consisting of over 1,000 condominium units and over 200 detached homes for approximately SG$680 million.

The project is a component of Mailand Hanoi City, which is now under construction and will include residential buildings, mixed-use complexes, schools, and hospitals. Keppel Land holds the right of first bid for the remaining phases of the project.

“In addition to real estate, we see several potential in Vietnam’s energy revolution,” Loh added. “We are also investigating the potential for a waste-to-energy company in Vietnam, as well as data centers, an area in which the organization excels.”

The Singaporean state investor Temasek is a key stakeholder in Keppel’s data center business, which constructs and runs facilities in Indonesia, Malaysia, China, and other countries.

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Some consider the firm an anchor enterprise that has contributed to Singapore’s fast industrialisation since 1965, alongside other Temasek-backed enterprises such as Singapore Airlines and telecommunications company Singtel.

Like to its regional competitors, Keppel has endured storms throughout its history. The firm was one of the largest offshore rig manufacturers in the world, but encountered difficulties as a result of the global transition from oil and gas to greener energy.

This year, Keppel exited its offshore operations to concentrate on data centers and urban development. In 2022, it announced plans to merge its rig segment with Sembcorp Marine, another Singapore-based rig manufacturer.

While oil prices were falling and both sides desired to transition to the renewable energy market, discussions for a partnership began. At the time, they thought that their combined cash and resources would better position them to satisfy the requirements of an industry striving to wean itself off fossil fuels. In February, shareholders approved the deal.

In addition to difficulties in the oil and gas industry, former senior management personnel of Keppel’s previous rig arm were reportedly involved in a multimillion-dollar bribery investigation involving Petrobras, the Brazilian oil giant. The scam allegedly involves employees who conspired to bribe Petrobras executives in order to gain contracts in Brazil.

The suspicious employees were finally cautioned by Singaporean authorities, but they were not punished, raising doubts as to why, considering Singapore’s stringent anti-corruption regulations, the law did not pursue them further.

In February, Minister in the Prime Minister’s Office Indranee Rajah briefed parliament on the conclusion, noting that attempts to investigate the matter across international boundaries did not provide convincing results. She stated, “Simply put, there is insufficient evidence, either documented or through witnesses, to establish beyond a reasonable doubt any criminal allegation against a specific individual.”

Having left the difficulties of the rig business behind, Keppel is now focused on charting a new course as an asset manager by shifting its focus away from the one-time profits generated by completed projects and towards the recurring income it can generate from its portfolio, such as services and rentals.

In addition to Vietnam, the corporation is looking to acquire additional assets in the other nine members of the Association of Southeast Asian States.

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