To win in tech and beyond, Vietnam should complement, not compete with ASEAN
Last week, global and regional leaders gathered in Bangkok for the Bloomberg Asean Business Summit. On the agenda: accelerating regional growth, assessing opportunities for economic transformation, debating the region’s technological potential, and much more.
The 52-year old union is at a crucial stage in its development. ASEAN countries are challenged with sustaining high levels of growth and continuing to increase their standard of living, in the face of trade wars and a volatile global economy. Bloomberg has suggested this next year could be one of its ‘most disruptive’.
New growth, new sectors
Our company, Kusto Group, has been operating in the ASEAN region for almost 15 years. From our headquarters in Singapore we have been able to take advantage of the many opportunities in this rapidly developing region. Indeed, today we have a front-row seat and are proud to be part of the remarkable pace of growth in countries such as Vietnam and beyond.
The signs of Vietnam’s dynamic transition are visible each time I visit – from the construction of enabling infrastructure and value-added manufacturing to the increasing number of housing and mixed-use real estate projects. Much of that economic success is down to policies that have brought greater predictability to the investment climate, which in turn has attracted long-term foreign direct investment (FDI). A robust and competitive work force also serves as one of Vietnam’s greatest assets.
With economic growth has come growth of the middle class – it is now estimated that the middle classes in Vietnam will number 44 million by 2020, and more than double that by 2030. This has driven Kusto’s investment in infrastructure, including the high-end real estate sector, developing Diamond Island, a luxury housing project in Ho Chi Minh City. Given the opportunities in this sector of the Vietnamese economy, this was just the start for us, and we have leveraged our positive experience across our operations.
Harnessing tech’s potential
During this period of growth in Vietnam it isn’t popular to reflect on the possibility for a slowdown. However, certain challenges are affecting the region, and the country is not immune. Namely; an over-dependence on complex trade related supply chains which expose the country to the impact of the US-China trade war, high levels of credit/debt and low reserves, and technology gaps, are all causes for concern.
Vietnam’s central government has recognised the potential of investing in technology and taking the lead on regional digital development. New high-tech parks have been established in Hanoi, Ho Chi Minh and elsewhere, and the benefits of teaching computer science at school are beginning to bear fruit. For large electronics corporations who are already moving manufacturing from China to Vietnam, the ability to employ skilled staff may mean these big players make longer-term investments. Smaller-scale entrepreneurial investors should focus their attentions on the increasing number of start-ups, particularly in online services and fintech. This is where we see the major potential for the Vietnamese economy to grow at speed, and where we can draw on our knowledge and experience, gained elsewhere in our global operations, to pursue the opportunities this tech advance presents.
Rather than directly competing with Singapore to be the regional tech hub, Vietnam can position itself as the alternative, with its population advantage and skilled workforce. Infrastructure investment and eased business conditions will be decisive in ensuring Vietnam can fulfil this potential, and having already risen from 104th place in the World Bank’s Ease of doing Business Rankings in 2007 to 68th place in 2017, there is no reason to think the country cannot continue to develop a supportive environment for these crucial investments.
In Vietnam, more than a million people are added to the workforce annually, giving them what some have termed a “golden population structure” – as a large workforce with competitive wages will boost production and consumption and act as a driver for growth. But no country can rely on their demographic dividend forever, making investment in technology and an improved business environment so crucial.
The countries of the ASEAN grouping have a long history of cooperation; but in this era of turbulence and trade, this should be further increased. By developing their complementary specialisms and prioritising intra-ASEAN trade, they can capitalise on the region’s dynamism – which has already allowed certain members, like Vietnam, to become middle-income countries in record time. Having achieved this, Vietnam continues to be a great example of successful transition and development, where foreign investors - such as Kusto - are willing and ready to participate in the economy. Events such as the ASEAN Business Summit provide the perfect forum to focus minds not only on the bigger picture, but also what concrete steps must be taken to ensure continued growth.
The writer is the chief financial officer of Kusto Group, a Singapore-based private holding company. Kusto Group was set up in 2002 and buys poorly-managed companies with the aim of transforming the business.