On the occasion of Singapore’s 50th anniversary of Independence, Mr Norman Lim, President of Singapore Business Group in Ho Chi Minh City shares his optimism and faith on a bright future of Vietnam-Singapore relations. Le Phuong reports. Could you please give an overview of the Vietnam – Singapore trade and investment cooperation relationship?
Vietnam and Singapore enjoy a successful trade and investment relationship that continues to grow stronger through the years. Singapore is the largest ASEAN investor in Vietnam – third globally – and has invested more than US$30 billion of investment capital in over 1,350 projects. In 2014, foreign direct investment (FDI) into Vietnam from ASEAN countries reached US$53 billion – Singapore accounting for more than 50 percent – in over 2,500 projects.
Singapore continues to collaborate with Vietnam in its aspiration to be an economic powerhouse in the ASEAN community. For example, Singapore invested into developing industrial, business and technology parks that have attracted hundreds of tenants from over 20 countries. These projects have brought in significant investments and exports while creating vast number of job opportunities in Vietnam – a substantial achievement showing the strong and successful relationship between Vietnam and Singapore.
With regards to trade, the two countries reached US$16.3 billion in 2014, equating to more than a 20 percent increase from 2013. In comparison to 2003 trade levels, bilateral trade has more than tripled and continues to grow strongly. The key areas of growth come from commodities export, which increased by approximately 22 percent, from 2013 to 2014, to reach US$3.2 billion. With the ongoing initiatives of AEC 2015, trade and investment between Vietnam and Singapore is set to increase.
What are your opinions on ASEAN Economic Community (AEC) Initiative and its impact, including trade and investment relationship between Vietnam and Singapore?
The ASEAN Economic Community (AEC) is characterized by five core elements, including (i) free flow of goods; (ii) free flow of services; (iii) free flow of investment; (iv) free flow of capital; and (v) free flow of skilled labour. Economically, this enhances market access between ASEAN member states.
AEC 2015 will bring greater harmonization with respect to arbitration practices and competition laws, and facilitate trade between ASEAN member states. Vietnamese enterprises will have access to a wider network of businesses and increased standardization is set to attract more FDIs from Singapore, as well as other ASEAN states. Not only will AEC attract investments into Vietnam, it opens the door for exporting skilled migrant workers across the ASEAN region – allowing a two way stream for a diversified exchange of services. A study conducted this year (by Vietnam’s Department of Overseas Labour Management) showed that the integration would lead to approximately a 60 percent increase in demand for high-skilled employment, such as managers and technicians, and a 25 percent in medium-skilled employment, such as trade workers and machine operators.
Another initiative is the Common Effective Preferential Tariff (CEPT) scheme, which has successfully removed tariff barriers in almost all goods categories, and Vietnam continues to eliminate import duties in sensitive commodities.
How will AEC 2015 impact Vietnam’s regulatory framework?
AEC 2015 outlines the platform for many policy reforms to align Vietnam to international standards. For example, Vietnam launched the e-customs system as a direct result of the trade facilitation initiative under the AEC 2015. In addition, investment liberalisation commitments have contributed to loosening Vietnam’s restrictions of foreign ownership in public companies.
According to you, what are the investment trends of Singaporean companies in Vietnam in the coming time?
Over the years, Singaporean companies have invested into a wide variety of economic sectors in Vietnam.
The processing and manufacturing sector boasts the largest investment with US$13.4 billion across 426 projects, while the real estate sector follows with US$10 billion across 74 projects. Moving forward, the processing and manufacturing sector will continue to attract FDI from Singapore because of its competitive cost and comparable efficiency of labour in the region. According to the Economist Intelligence Unit, Vietnam’s unit labour costs are almost 63 percent lower than China. Another key factor to consider for increased investments in the processing and manufacturing industry is Singapore’s high GDP – making it a prime market for Vietnamese exporters. Thus, further strengthening Singapore and Vietnam’s relationship.
Another industry that will likely drive FDI from Singapore is the travel and tourism sector which is expected to grow at approximately 6.5 percent in terms of visitor exports. A study completed last year (by the World Travel and Tourism Council) estimates investments into this sector to increase at a rate of 6.5 percent per annum over the next 10 years.
In short, the integration, harmonization and standardization efforts of ASEAN and APEC will drive the relationship between Singapore and Vietnam to become stronger and more successful. According to the Economist Intelligence Unit, from now until 2020, ASEAN will have the third fastest capital growth rate in the world after China and India, and many large companies have a strategy that is focused on the ASEAN bloc. Accordingly, multi-national companies (MNCs) are seeking to establish regional headquarters in Singapore in order to direct investments into emerging markets, such as Vietnam. Overall, Singapore and Vietnam will undeniably grow together, forge a strong relationship, and have a bright future ahead.
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