Vietnam remains magnet to Singaporean investors

Singapore - Vietnam’s leading source of foreign investment

Most notably, Singapore has been Vietnam’s leading source of foreign investment with Singapore's Sembcorp Industries and Vietnam's Becamex Group establishing the first Vietnam-Singapore Industrial Park (VSIP) in 1996.

So far, there have been 12 VSIPs taking shape across Vietnam, attracting a total investment of about US$17 billion and generating more than 300,000 jobs in the process.

Furthermore, there have been thousands of Singapore-invested projects in the country over the past-half century. Last year witnessed Singapore become the largest foreign investor in Vietnam, with capital amounting to US$6.46 billion, accounting for 23.3% of the total FDI inflows into the country.

While FDI capital into Vietnam decreased by nearly 20% in the past month, Singapore poured US$767.6 million into the Vietnamese market, representing two thirds of the total newly registered capital, and becoming the largest investor in the country.

By the end of last year, the island state had become the biggest investor in Vietnam in the Southeast Asian region with more than 3,600 projects capitalised at over US$70 billion.

The majority of Singaporean investments in Vietnam have been poured into such fields as processing, real estate, and electricity generation. Singapore's prominent large-scale projects include the liquefied natural gas (LNG) Bac Lieu power plant, Nam Hoi An resort in Quang Nam, and the Long An LNG Power Plant Project I and II with registered capital reaching US$4 billion, US$4 billion, and US$3.12 billion, respectively.

Connecting to the world's major merchants through Singapore

With regard to trade exchanges, Vietnam has been listed among the top 10 countries exporting goods to Singapore, witnessing double-digit growth in turnover per year.

According to the Vietnamese Trade Office in Singapore, Singapore represents an international transshipment market with high openness and total trade turnover reaching up to US$1.2 trillion in 2021, a rise of 19.7% from the previous year.

As its economy is mainly service-based, industry is primarily focused on electronics, precision mechanics, and the production chain of high-value-added products.

Experts pointed out that there remains plenty of room for Vietnamese goods to enter the demanding market, particularly as Singapore's consumption is completely dependent on imports.

At present, major Vietnamese export items to Singapore include machinery, equipment, mobile phones, components and spare parts of all kinds, while Singapore is also a large purchaser of Vietnamese crude oil.

Do Hoa, general director of IME Vietnam, revealed that although Singapore is a high-end market that has set forth stringent import requirements, Vietnamese businesses are advised to fully tap into the market as many experienced wholesalers from around the world have established their headquarters there.

Vietnamese enterprises should therefore seek these wholesalers and sell goods in large quantities, or alternatively export goods to other markets, Hoa suggested.

Opportunities ahead for sustainable development

In an article recently published, Singaporean Ambassador to Vietnam Jaya Ratnam pointed out that both countries have secured time-honoured relations with bilateral trade turnover growing steadily over the past decade, reaching about US$20 billion in 2021, up 18.7% compared to 2020.

At the regional level, both countries are members of FTAs such as the Regional Comprehensive Economic Partnership (RCEP) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

The Singaporean diplomat predicted that both sides can further enhance economic cooperation in five main areas this year, including the digital economy and innovation, infrastructure, energy, and sustainable development.

Moreover, the two countries have urgently ramped up cooperation in tackling climate change and promoting multi-faceted connectivity in terms of trade, investment, finance, transportation, and tourism.

Dr. Vo Tri Thanh, former deputy director of the Central Institute for Economic Management, analysed that, amid a decline in global FDI inflows, supply chain disruptions, and global inflation, Vietnam can be regarded as an attractive investment destination thanks to its steady growth rate, rapidly growing economy, and effective COVID-19 containment efforts.

Furthermore, Singaporean investors are anticipated to enjoy a wealth of opportunities for expanding export markets to those that Vietnam has signed FTAs with, such as North America, China, Japan, and ASEAN.

Similarities in market openness and members of FTAs will therefore help the two countries to formulate a legal framework to facilitate bilateral trade in the future, Dr. Thanh emphasised.