Stronger Vietnam - Singapore economic ties expected with Prime Minister's visit
Strengthening relations with Singapore is set to have a positive effect on the investment and business environment of Vietnam.
Over the past year, Vietnam has become an attractive destination for foreign firms seeking to start production in the country, and this positive change is set to continue. It has also turned into a hub for foreign electronics manufacturing projects.
Companies that wish to shift to Vietnam benefit from continued exports from various markets, especially since it is an important partner in many free trade agreements (FTAs). Confidence in the country's ability to upskill the workforce, comply with global production standards, and implement good governance in the supply chain also shines through because of the commitment of technology firms and suppliers to pour in capital there.
Large corporations are choosing to shift their electronic manufacturing plants for many reasons, including but not limited to lower labour costs, simpler supply chain integration, and the 15 FTAs allowing better access to free trade. With countries such as Singapore shifting, Vietnam is expected to benefit greatly. The strategic partnership between both countries allows new opportunities to open up in the digital and green economies.
The year 2023 marks two key milestones for Singapore and Vietnam, as it is the 50th year since the establishment of its diplomatic relations and the 10th year of the establishment of the strategic partnership between the two countries. Bilateral trade stands at US$23b in 2022, whilst Singapore has become Vietnam's second-largest cumulative foreign investor, with around US$70.8b invested in around 3,097 projects as of 20 December 2022.
Business environment and ties with Singapore
Vietnam is a dynamic market with a lot of potential especially since the country is seeing a steady increase in consumer expenditure, thanks to rising incomes. Despite the pandemic, it has established itself as a stable yet rapidly developing destination for international business and foreign investment.
Some business-friendly conditions and policies in Vietnam allow it to be a hotbed for foreign firms, including its consistent track record of economic and market growth, a young and skilled workforce, and close proximity to other emerging economies in East Asia. These all encourage a healthy amount of foreign capital and make Vietnam stand out amongst Southeast Asian countries.
Vietnam-Singapore Industrial Park (VSIP) by Sembcorp, one of the earliest and most successful Singaporean projects in Vietnam, has become an icon in Vietnam-Singapore relations. There are currently 12 VSIPs across Vietnam, which attract US$17b worth of capital, as well as create more than 300,000 jobs.
Foreign companies that have ventured into Vietnam include Samsung, which opened a new R&D Center in Hanoi, and the Lego Group, which signed with VSIP to build a new factory in the region. Meanwhile, Apple is also working towards moving MacBook production to the country amidst tensions between Washington and Beijing.
University of Bristol (UK) lecturer Ho Quoc Tuan explained that this diversified production has significantly benefited Vietnam, and it is likely to benefit greatly from foreign manufacturers' shifting of production out of China, no matter how much it eases COVID-19 policies.
Expanding cooperation, strengthening connections
With the visit of Vietnam’s Prime Minister Pham Minh Chinh to Singapore on 8 February 2023, the country is looking forward to strengthening its economic relations with Singapore. This may also give way to expansion in other areas of cooperation such as the digital economy, regional and global supply chain connectivity, energy, and carbon credits. Previous government-level MoUs signed between the two countries have so far enabled Singapore and Vietnam to seize new opportunities in the digital and green economy amidst the pandemic, and both countries can expect to benefit from this continued bilateral cooperation.
They both have a common goal when it comes to achieving net-zero emissions. It can be noted that Singapore is committed to doing its part in fulfilling the goals of the Paris Agreement, which is in line with Vietnam's goal of accelerating climate action.
Given Vietnam's rapid urbanisation and growth, more investments would also allow for further development of urban areas, ports, expressways, and green energy.
On the other hand, there are various sectors to work around in order to deepen the economic partnership between Vietnam and Singapore. They can serve a common purpose of driving economic growth through technology and innovation especially since both are thriving startup ecosystems.
But whilst it is valuable to pursue new opportunities in areas such as innovation, energy, and sustainability, it is also important to deepen people-to-people connections and multi-faceted connectivity in trade and investment, finance, transport, and tourism, as these ensure the continuous good progress that has already been achieved in existing industries.