Singapore is top investor in Vietnam for 2nd year running

Singapore

SINGAPORE leads foreign direct investments into Vietnam for the second consecutive year as firms continue to diversify their businesses, expand and capture new opportunities despite the Covid-19.

Total foreign direct investments (FDIs) into Vietnam remain sizeable, amounting to US$28.5 billion in 2020 and US$23.8 billion in the first ten months of this year.

Singapore's FDIs into Vietnam stood at US$6.8 billion for the first 10 months of 2021, making the city-state the top investor there. In 2020, Singapore's FDIs into Vietnam were US$8.99 billion, the largest, beating South Korea's US$3.7 billion and China's US$2.4 billion, according to Ministry of Planning and Investment, Vietnam.

Chew Hwee Yong, global markets director for South-east Asia at Enterprise Singapore (ESG) tells The Business Times that firms are attracted to Vietnam's economic potential and large domestic market with a growing middle-class.

"Vietnam's population stands at 97 million. With a middle-class population of more than 30 million, which is projected to grow to 56 million by 2030, consumer spending in Vietnam has great potential to increase over the next decade, presenting growth opportunities for businesses in the consumer sector," he said.

Vietnam is expected to retain its position as one of the fastest growing South-east Asian economies, with a gross domestic product (GDP) growth of 2.9 per cent in 2020 and a growth forecast of about 3-3.5 per cent for this year.

Chew said Singapore companies have always had strong trade and investment interests in Vietnam. It was the top country for Singapore companies to explore overseas expansion in 2020. Key sectors include manufacturing, real estate, wholesale and retail trade.

"We are also seeing the financial and insurance services sector emerging as a strong draw for Singapore firms in Vietnam," Chew said.

ESG, which helps companies build capabilities, innovate and internationalise, continues to see potential for investment and collaborations in Vietnam, notably in manufacturing due to Vietnam's connectivity to consumption hubs in Asia and beyond; consumer and lifestyle sectors, underpinned by Vietnam's growing middle class and rising purchasing power; real estate, smart city solutions and urban solutions on the back of the country's rapid urbanisation; and digital transformation as the government aims to boost digitalisation and innovation across the country.

"In addition, Vietnam has a large pool of digital and tech-savvy talent that Singapore companies can tap to support their business needs," Chew said.

Singapore companies are plugged into Vietnam through various means such as the Global Innovation Alliance network in Ho Chi Minh City.

Chew said:"Our overseas centres in Hanoi and Ho Chi Minh City can also provide market knowledge to guide businesses who are entering the market and introduce Vietnamese partners to assist with their business plans.

"For companies that require more targeted support for their overseas efforts, they can also partner ESG to embark on internationalisation projects."

The Singapore Smart City Consortium is one such example. ESG supported the collaboration between Excelpoint and 18 Singapore companies to offer a holistic suite of smart cities solutions and services such as smart security, smart mobility and sustainability, This allows them to capture the growing demand for smart cities solutions and projects in Vietnam.

NTUC Income is also making its first foray into Vietnam with its digital-first micro-insurance Droplet, a first-of-its-kind micro-insurance that covers commuters against price surges on ride-hailing platforms on rainy days. It was first launched in Singapore in 2018 in response to consumer pain points.

In Vietnam, NTUC Income is partnering Post and Telecommunication Joint Stock Insurance Corporate for the rollout. NTUC Income's insurance-as-a-service model enabled it to take its digital-first business models to partners overseas and enhanced their speed to market.

ESG helped prepare NTUC Income prior to their launch with information and insights on the insurance market and regulatory advice, and connected them with the leading insurance companies in the market, although the partner they chose to work with in the end was through their own contact, BT understands. Besides Vietnam, NTUC Income is also launching Droplet in Indonesia and Malaysia.

Last June saw the establishment of the Vietnam-Singapore Smart Energy Solutions (VSSES), a joint venture between Becamex IDC Vietnam, Sembcorp Industries Ltd, and VSIP Vietnam. The JV aims to develop and implement rooftop solar solutions and other smart urban energy solutions across Vietnam. By September 2021, VSSES had successfully implemented 3MWp of rooftop solar systems connected to the national grid. VSSES also has another 10MWp of rooftop solar projects in progress, which will be completed by early 2022.

Relations between Singapore and Vietnam have grown from strength to strength since the two countries established bilateral diplomatic relations on Aug 1, 1973. Bilateral ties were elevated to that of a strategic partnership in 2013. The 10 Vietnam-Singapore Industrial Parks including Binh Duong, Hai Phong, Bac Ninh, Quang Ngai, Hai Duong and Nghe An are concrete symbols of the close economic cooperation between the two countries.

At the the 14th political consultation between the two countries, Vietnam's Deputy Minister of Foreign Affairs Nguyen Quoc Dung highlighted the need to boost cooperation between the two economies to ensure supply chains and growth in new fields such as digital transformation, smart development, e-commerce, and the continued development of the Vietnam-Singapore Industrial Parks into high-tech and innovative hubs.

READ MORE: Excelpoint rides Vietnam's tech boom as more firms adopt China+1 supply chain model