Vietnam has been a bit of a darling of the Asean in recent years. Between favorable fundamentals, such as a young and large population and competitive labor costs, the country has been one of the main benefactors of US-China tensions, with many manufacturers turning to Vietnam as an alternative to China or as part of a China plus one. strategy.
More recently, “decisive containment measures and targeted government support,” as defined by the International Monetary Fund in its country focus during the early years of the pandemic, helped mitigate the economic impact of the pandemic.
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Pre-Covid, Vietnam’s real gross domestic product (GDP) grew by 7.02 percent. A year later, in 2020, this fell to 2.91 percent; despite this sharp decline, it was still one of the highest growth rates in the world. In 2021, GDP slowed further to 2.58 percent due to continued restrictions on movement and a sharp decline in consumer spending.
This year, the Vietnamese government has forecast GDP growth of 6 to 6.5 percent.
According to the Singapore Business Federation’s (SBF) National Business Survey, which was conducted from July to October last year, Singaporean businesses remain excited about Vietnam.
Vietnam came in second in terms of countries that Singaporean companies were most interested in. Of the 440 companies that said they plan to expand in the future, 31 percent said they would like to go to Vietnam, compared with 34 percent who wanted to venture into China.
In third place were Malaysia and Indonesia (30 percent respectively).
Indeed, Singapore has been the largest investor in Vietnam for the past 2 years.
In 2021, Singapore pumped $10.7 billion into the country, accounting for 34.4 percent of Vietnam’s total investment capital. This is 19 percent more than in 2020, when the city-state pumped out $8.99 billion, according to Vietnam’s Ministry of Planning and Investment.
It is noteworthy that there was no decline in terms of total realized foreign direct investment (FDI). In 2018, the realized direct investments amounted to 19 billion dollars. From 2019 to 2021, realized direct direct investments amounted to $20 billion per year.
“We can view this as residual foreign direct investment committed prior to Covid. But what is encouraging and exciting is that despite Covid, investors were still confident and continued to pump money into the country,” said Harry Loh, chief executive officer of UOB Vietnam.
Meanwhile, the registered FDI took a hit. In 2018, the registered FDI was $35 billion, before climbing to $38 billion in 2019. In 2020, registered foreign direct investment plunged to $29 billion, before rising to $31 billion in 2021.
Loh noted that the drop is “understandable due to travel restrictions.” Also worth noting, he said, is that the figure jumped back to $31 billion the following year.
“From this slight increase, we can infer that there is still a lot of interest from foreign investors,” he said.
“I think foreign investors will be more confident (ahead) because many business people view Covid as a period of baptism – who can survive it is stronger and partnerships are worth exploring further.”
Reconstruction of Covid
On Friday (February 25), Vietnamese President Nguyen Xuan Phuc attended a roundtable meeting for about 100 government and business leaders from Singapore and Vietnam as part of his state visit to Singapore.
Notably, President Phuc’s visit is the first state visit to Singapore since the start of the pandemic in early 2020.
During the dialogue, participants discussed new and emerging opportunities for cooperation between Singaporean and Vietnamese companies, including digitalisation, infrastructure and sustainability.
SBF and UOB were both recognized by Vietnam’s Ministry of Planning and Investment with a Certificate of Merit for their efforts to promote foreign direct investment in Vietnam.
Since November 2019, SBF’s GlobalConnect@SBF program has facilitated 20 projects in Vietnam; nearly 200 Singaporean companies have benefited from their advisory support.
Meanwhile, since signing a comprehensive Memorandum of Understanding with the Vietnamese Foreign Investment Agency in November 2020, UOB has helped more than 60 companies invest in Vietnam.
Their pledges totaled S$1.6 billion. The companies are from Singapore, Malaysia and China and are active in sectors such as consumer goods, manufacturing, construction and infrastructure.
UOB also plans to enable S$3 billion in potential investments in sectors such as manufacturing, technology and consumer goods over the next 2 to 3 years.
Meanwhile, Vietnam is actively looking to revive its battered tourism industry with plans to fully reopen the country to foreign visitors. Lifting almost all travel restrictions from March 15 will create a lot of positive spin-off, Loh said.
According to data from Statista, the country had one of the highest numbers of international tourist arrivals in the Asia-Pacific region in 2019, with an annual increase in tourism revenue before 2020.
“This will create a lot of positive sentiment among companies… This resumption will also boost domestic consumerism in the country and the spin-off effect will be very positive.”
By MINDY TAN @ business times