The wait-and-see moment in Vietnam is over. Investors are being told that now is the time to take the plunge in one of Southeast Asia’s most promising economies.
With growth of 6.5% this year, the country of 92 million has been a magnet for global investors in recent years as its Communist has actively concentrated on improving diplomatic ties, business-friendly policies and international trade agreements.
Stronger economic collaboration between Thailand and Vietnam is expected to yield great benefits for the two countries and ensure a seamless transition into the new world of the Asean Economic Community (AEC).
“Vietnam and Thailand together can unleash mammoth economic power and become the growth engine for Southeast Asia,” said Sanan Angubolkul, president of the Thailand-Vietnam Business Council.
He made the comment at a recent seminar titled “Bangkok-Ho Chi Minh: Bridge to the Silk Road of Asean” held by The Post Publishing Plc, Asset Pro Management and Amata VN Plc. Experts taking part highlighted the opportunities for Thai and Vietnamese investors to tighten collaboration and unlock the full economic potential of both nations.
Vietnam is seen as the next go-to investment destination globally. One big driver has been rising labour costs and complex regulations in China, which have impelled investors to rethink their strategies in recent years.
With a young and energetic workforce making up 70% of the population, Vietnam has emerged as a leader in quality low-cost manufacturing in the region. The labour cost is half that of China and 40% of the cost in Thailand and the Philippines.
Thailand, as the second largest economy in Southeast Asia, can share advanced technologies and business know-how with the frontier market given that most industrial manufacturing technologies used in Vietnam are still less complex than those in Thailand, said Mr Sanan, who is also the chairman and president of Srithai Superware Plc, one of the region’s largest plastic and melamine product makers.
Despite the sometimes opaque investment policies and political structures, he urged Thai investors not to be afraid to start doing business in Vietnam.
“Vietnamese governments have been actively promoting the ease of doing business here, and upon the completion of infrastructure and economic corridors, logistics will become much cheaper,” he said.
Thailand and Vietnam together can strengthen collaboration on the Greater Mekong Subregion (GMS), an economic area that encompasses southern China as well as Thailand, Vietnam, Cambodia, Laos and Myanmar, Mr Sanan added.
“The GMS has great potential with a combined population of 326 million, exceeding the United States at 320 million. Vietnam and Thailand will become the important economic pillars for this economic cooperation,” he said.
Vikrom Kromadit, the founder and chief executive officer of the industrial estate developer Amata Corporation Plc, said Vietnam’s gross domestic product (GDP) had expanded at an impressive pace in recent years, thanks to political stability and a diligent workforce.
“Vietnam is catching up quickly with bigger economies, boosting its GDP to half that of Thailand from one-third in less than a decade,” he said.
Political stability in the one-party state is the key selling point of Vietnam, according to Mr Vikrom. “There are no conflicting political parties, allowing the country to grow sustainably and continuously.”
In his view, the growth of electronics, high-tech businesses and research & development (R&D) has been gaining momentum in Vietnam. Construction of the Lach Huyen deep-sea port in Haiphong, meanwhile, will help facilitate logistics and open new shipping opportunities.
INVESTMENT INFLUX
The Hanoi government has liberalised the investment atmosphere and established pro-business policies to promote more foreign direct investment (FDI) inflows, said Tran Duy Dong, director of the Economic Zone Management Department of the Ministry of Planning and Investment (MPI).
The continuing influx of investments is underpinned by the lowering of trade barriers, more transparency and facilitation of administrative processes, he said.
The country has received nearly US$20 billion in FDI so far this year, led by South Korea and Malaysia. More than half of the new investments are in processing industries, followed by energy and property, according to the General Statistics Office.
Regionally, Asean is Vietnam’s third largest trading partner after Europe and United States, and the country’s total export revenue of $290 billion is more than 160% of GDP.
“Currently, revenue from Asean-Vietnam trade stands at $36 billion. Once the AEC is fully operational, there will be a more positive upward trend for the region,” said Mr Dong.
Vietnam has also been active in pursuing bilateral and multilateral trade pacts, the most significant being the Trans-Pacific Partnership (TPP). The 12-nation group led by the United States accounts for 40% of world GDP (about $28.1 trillion), one-third of global trade ($11 trillion) and 800 million consumers.
Another recent bilateral free trade agreement (FTA) signed on Dec 20 was with South Korea. It will eventually reduce tariffs on more than of 90% of the goods traded between the two countries, according to the South Korean Ministry of Trade, Industry and Energy.
Opportunities exist for both the private and public sector to increase bilateral trade between Thailand and Vietnam, according to Nguyen Thanh Binh, director of the Commercial Information Center of the Vietnam Chamber of Commerce and Industry (VCCI).
“Thailand represents about 10% of Vietnam-Asean exports. There is significant potential for the two countries to increase bilateral trade given that both are attractive to one another,” he said.
Among the 10 Asean countries, Vietnam is Thailand’s fourth-largest trading partner and the 11th biggest in the world. Bilateral trade increased 13% last year to $12 billion and is expected to reach $20 billion by 2020. Thailand enjoys a large surplus with exports totalling about $8 billion.
Mr Sanan added that the robust Vietnamese economy was reflected in positive export momentum amid weak global demand. “While other export-reliant countries are seeing some losses, Vietnam has been able to maintain a healthy 6% growth,” he said.
Vietnam’s exports have doubled over the past five years. The United States is the country’s largest export market, accounting for 18% of the total, followed by Japan and China at 11%. Other large markets are South Korea (5%) and Malaysia and Germany at 4% each. China accounts for 28% of all imports by Vietnam, followed by Korea (15%), Japan (9%), Taiwan (8 %), Thailand (6%) and Singapore (6%).
Logistics and connectivity are another key attraction in Vietnam. Le Duy Hiep, president of the Vietnam Logistics Business Association, said nine major road, bridge and other infrastructure projects were under way to strengthen regional Asean links.
The most important artery connecting Thailand and Vietnam is the Japan-funded Southern Economic Corridor, a 900-kilometre route running from Ho Chi Minh City through Phnom Penh to Bangkok, he concluded.