Vietnam becomes increasingly attractive to foreign investors

Sushant Palakurthi Rao – head of Global Partnerships at Agility

Sushant Palakurthi Rao – head of Global Partnerships at Agility that has offices in over 100 countries, including ASEAN – attended the recent 27th World Economic Forum on ASEAN (WEF ASEAN) in Hanoi. He granted an interview to the Vietnam News Agency on FDI-related issues. Following is the full text of the interview.

Reporter: Over the last 30 years, Vietnam has actively improved its business environment in order to attract more foreign investment. How do you assess the results achieved from this?

Sushant: We heard at the WEF on ASEAN conference from Vietnamese Prime Minister Nguyen Xuan Phuc and other leaders as how FDI is growing in the country. From the mere US$10 billion in 1988 when Vietnam first started absorbing FDI, the country’s total export revenue is now expected to hit US$225 billion in 2018. FDI firms have made up 20% of the total State budget collection, 10 times higher than the figure in 2000. In particular, over 50% of Vietnam’s total industrial production value comes from FDI firms.

I believe the numbers do the talking. Companies make their business plans very carefully because it is a very competitive world. So if a lot of FDI is flowing into Vietnam, it means an increasing confidence among investors in the market in terms of administrative procedures, labour productivity, connectivity, and infrastructure.

We can see increasing manufacturing here. If you are a manufacturer and looking for a country to invest in, you will think, okay, I can have access to Vietnam, a big talent pool, more and more skills, flexible, very suitable for what I need. I can move my products easily out of Vietnam to my export markets.

The FDI flow figures show Vietnam’s investment environment becoming more facilitating for businesses. They also attest to the role of the Vietnamese Government and this fact that helps facilitate the country’s investment climate.

Reporter: Agility is a global logistics group with offices throughout more than 100 countries, including ASEAN. In Vietnam, you have offices in Hanoi and Ho Chi Minh City. With the experience of operating in air, ocean, and road logistics in Vietnam for 25 years, how do you place Vietnam’s market against other countries in the region?

Sushant: We have a very strong presence in ASEAN. We see Vietnam as part of ASEAN, providing a lot of opportunities for us. We look for local talents, knowledge, and key local resources in logistics to help us build our global network. 

In Agility’s recent report on emerging markets in logistics, we analyse how countries are performing and improving their logistics environment. If you look at our top 20 company performers in the report, five of them are from ASEAN and one is from Vietnam. 

Vietnam has become an increasingly important market for us. The country is growing at about 7%. Any markets that grow that high means they are good for logistics, that logistics is needed. We like to invest in countries that are growing fast.

As mentioned earlier, manufacturing is moving to Vietnam. Our customers move to Vietnam from other countries. One of the reasons is manufacturers are looking to diversify their production, for various reasons – cost of labour, market access, and tariff, etc.

Hanoi is our major export facility for Vietnam. Most of our freights go from Hanoi to Chicago, to Amsterdam, to Europe for example. We have been here for a long time. We will continue to be here and invest in whatever opportunities arrive towards our customers. We will invest to support them.

Reporter: Foreign-invested enterprises have become an important driving force for Vietnam’s economic development and international integration, while SMEs are the backbone of the national economy. Vietnam is looking forward to boosting the development of its private sector. In your opinion, what should we do to complete this mission?

Sushant: Let me tell you this. I opened the newspaper Vietnam News the other day. I don’t know if it is you (the Vietnam News Agency) or your competitor, my apology, but there is a story in there about how local authorities in Vietnam are now trying to move a lot of activities online. A lot of admin things going online will have a very positive impact, not only to the business ecosystem. But it also gets citizens to work in that mindset. The Government is making some good strikes in that sense.

What I can see in practice is that the Government plays an effective role in facilitating, encouraging, and incubating. All I want to say is that the Vietnamese Government and authorities are doing a good job in making Vietnam an attractive place for foreign investors.

From a logistics and freight point of view, Vietnam has a lot of capability for distribution, which is clustered around the manufacturing zones across Vietnam. However, the geography of Vietnam is such a long country. In some cases, it is more convenient to move goods from Ho Chi Minh City to Cambodia then to Hanoi. The distance is shorter, not just a matter of hundreds, but thousands of kilometres.

We hope that our growth of hubs in Vietnam could stretch to many. It could go to Hai Phong, Hue, Da Nang, etc. Growth hubs could be well spread across the incredible geography of this country. The growth will help more equitable development for the nation. That will also be good for logistics and the private sector because it allows SMEs located somewhere else in provinces to have better access to the capacity.

Connectivity is a key driver of this growth. If you make it difficult to go north-south, let alone into land and countryside, you will miss out on some opportunities. If Vietnam becomes more convenient to do business, you are going to get more businesses here.

Reporter: The world economy is entering the Fourth Industrial Revolution era. How do you think Vietnam will fit in the revolution and take advantage of it?

Sushant: The Fourth Industrial Revolution offers both opportunities and challenges. I am a strong believer that technology can be an aid that helps processes and systems in every area. 

Vietnam is an agricultural country. So, let’s take agriculture as an example. Again, every sector will be touched by the advancement of technologies – and agriculture is, of course, part of it too. If you think about a simple thing like drone technology. It allows you to make predictions, where flooding or drought might take place.  Telephones work for fishermen. It is a revolution because it allows you to shorten times between the catch and the move to fisheries, sales, and the market. Drone technology is a good example of the ways farmers are going to benefit and be better prepared for any disruption in their work. That is just one example of how Vietnam can benefit from the Fourth Industrial Revolution. 

Another example of how Vietnam fits in the revolution: I think a meeting like the WEF on ASEAN 2018 is a good indication that Vietnamese leaders and the Vietnamese Government are prioritising new advancements in technology, in science, and innovation. They are very keen to see how to capitalise on the opportunities. 

In just 10 years, Vietnam is now a middle income country. So I think Vietnam is fitting very well.

But it is important that you move with the speed because the changes are fast and require agility. It also requires nimble approaches because the pace is so quick.

Things are getting better, but as we mentioned at the beginning, the competitive pressure never stops - and the era of technology is definitely one of those competitive pressures.