April 2018 celebrated 45 years of diplomatic ties between Singapore and Vietnam. With air travel distance only 1.5 hours away and the new establishment of six diplomatic agreements, foreign investors continue to benefit from the robust bilateral ties between the two member countries. Evidently, Vietnam remains the first stop for Singaporean firms to invest in —small and medium enterprises (SMEs) or large companies when they venture overseas.
Apart from the strong tie between Singapore and Vietnam, Vietnam is one of the fastest-growing economies in the world and is ranked as the 3rd largest market in Southeast Asia. A combination of low costs and abundant natural resources are only a small part of the key factors that attract Singaporean investors. In this article, we will present the 8 reasons why Singaporean companies should invest in Vietnam
8 Reasons Singaporean Companies Must Invest in Vietnam Now
1. Vietnam-Singapore Industrial Park (VSIP)
The close economic cooperation between Singapore and Vietnam has contributed to the establishment of eight Vietnam-Singapore Industrial Parks and projects in Binh Duong, Hai Phong, Bac Ninh, Quang Ngai, Hai Duong and Nghe An.
Over the years, these eight Vietnam-Singapore Industrial Park projects have attracted over US$32 billion of investments, with more than 600 companies providing jobs for more than 200,000 workers. Industry partners that establish in these parks come from diverse sectors such as food manufacturing, chemicals, and precision engineering. Vietnam’s development strategy that focuses on improving the accessibility and quality of industrial parks is a stepping stone for Singaporean firms to venture into the Vietnamese markets.
2. Trade Agreement
Vietnam shows its commitment towards collaboration and trading with Singapore with the Singapore-Vietnam Connectivity Framework Agreement. Building upon the competencies and strength of the two countries, this agreement aims to accelerate Vietnam’s rapid growth and to promote Singaporean firms’ active participation in the process.
Vietnam is Singapore’s 12th largest trading partner, while Singapore is Vietnam’s 6th largest trading partner. Commodities that have shown the highest growth in trade between Singapore and Vietnam include grease, iron and steel products, tobaccos, leathers, seafood, vegetables, and glass products.
3. Growing GDP (Gross Domestic Product)
Vietnam’s economic growth is considered one of the fastest in the world. The stable GDP rate in Vietnam is recorded at 6.81% every year.
4. Ease of Doing Business in Vietnam
Doing business in Vietnam has climbed from 82th to 68th amongst 190 economies in the World Bank’s Ease of Doing Business ranking in 2017. One of the major factors is that Vietnam has improved the transparency and openness of regulations pertaining to foreign trade. Simplified agreements such as tax incentives and reduced electricity costs give Singaporean firms competitive benefits to enter Vietnam.
On top of that, Vietnam government is constantly making improvements to their processes and therefore the future prospects of ease of doing business in Vietnam are very assuring. Vietnam is envisioned to hike to the 60th spot of EDOB by 2020.
5. Modern Infrastructure
The comprehensive and modern Infrastructure system in Vietnam such as transportation and telecommunication systems can really benefit the investors from Singapore greatly in terms of costs, productivity and efficiency. To name a few, these complete infrastructures are Tan Son Nhat International Airport and Saigon Port.
6. Strategic Location
Located in the heart of the ASEAN regions, Vietnam serves as a critical location for countries surrounding it. It has a short distance to other promising nearby markets with China being the most notable. The long coastline of the country provides instant and direct access to the Southern China Sea and Southeast Asian neighbours with an abundant of labours, natural resources and knowhow. Ho Chi Minh City and Hanoi are considered two of the major cities where Singaporean firms jumpstart their businesses.
7. Young Population
The demographics of Vietnam are young and projected to grow within the next decade. Among the 96 million people in Vietnam, the majority of them are young people under 35 years old, with a median age of 30.4 years old. As the result, the talent pool and labor force in Vietnam is going to be more abundant and skilled in the very near future.
8. Low Start-up Costs
This comes as a plus to Singaporean businesses as there are minimal capital requirements for most businesses and industries in Vietnam. As a result, Singaporean businesses can easily enter Vietnamese market with favourable financial plans.