Vietnam – Malaysia Towards Comprehensive Strategic Partnership

Since Vietnam joined the WTO in January 2007, Malaysia-Vietnam investment and trade relations have been improved significantly.

 

Vietnam is an important economic partner for Malaysia, while Malaysia is among Vietnam’s top ten trading partners in recent years.

 

For the period 2007–2012, total trade between Malaysia and Vietnam increased consistently from US$4.7 billion in 2007 to US$7.2 billion in 2011, and increased further to more than US$7.5 billion for the period January-October 2012.

 

Currently, Malaysia is Vietnam’s fifth largest export destination and the eighth largest import source. Within ASEAN, Malaysia has been in the list of top five trading partners for Vietnam in the past decade. The figures would indicate that the close bilateral trade relations are rapidly growing, contributing to mutual development.

 

The inflow of FDIs into Vietnam in recent years has been accompanied by great demand for new technologies, machinery, equipment, parts and expertise. Between 2001 and 2011, Vietnam spent more than US$4.4 billion in importing machinery, equipment and parts from Malaysia alone. Newly-established foreign factories and existing ones alike require upgrading, new production lines and equipment. This would necessarily include the importation of Malaysian-manufacturing bases in Vietnam.

 

For the period between 1994 and 2011, manufacturing products Malaysia exported to Vietnam were mainly electric and electronic products, transport equipment, textiles and clothing, food and beverage, wood-based products (other than furniture), plastic-based products, optical and scientific equipment and paper and paper-based products. Since the establishment of diplomatic relations in 1973, bilateral trade has consistently been in Malaysia’s favour.

 

On the investment front, Malaysia was one of the top five investors in Vietnam in recent years until 2011, and ranked first in 2008. As recently recorded by Vietnam’s Ministry of Planning and Investment, Malaysia ranked seventh, with 433 projects and a registered capital of US$11.37 billion. Among ASEAN countries, Malaysia ranks second after Singapore. In Ho Chi Minh City, Malaysia still ranks first among foreign investors.

 

The two countries have concluded many cooperation agreements in a range of areas, including economics, trade, science and technology, aviation, investment, post and telecommunications, banking, tourism, youth and sports, as well as many bilateral MOUs. An important milestone is the 2004 Joint Statement on Comprehensive Cooperation Framework for the 21st Century. This Statement is a significant document that provides directions and lays the foundation for building stable and long-term relations based on mutual trust. It also prescribes the enhancement of cooperation in virtually every field of human endeavour for the benefit of the people of the two countries in the interest of peace, stability, and development of the region. This Statement has been the basis for both sides to convene the Malaysia-Vietnam Joint Trade Committee Meetings, which have been successfully concluded in recent years.

 

In the coming years, Vietnam will continue to be an important ASEAN member and an important economic partner for Malaysia.

 

Being members of ASEAN, both countries have enjoyed the CEPT in import-export activities. This can be considered as one of the biggest advantages in fostering bilateral trade. For the first 11 months of 2012, bilateral trade has been valued at US$7.5 billion, larger than total trade for 2011 (US$7.2 billion), which augurs well for the coming years.

 

The geographical distance between the two countries is not too vast and proves to be convenient in terms of land, air and maritime transport. Currently, Malaysia Airlines (10 times weekly), Vietnam Airlines (daily) and Air Asia (daily) provide direct and non-stop KUL-HAN-KUL flights, an advantage particularly for the trade and tourism sectors. KUL-HCMC-KUL flights are even more frequent.

 

Malaysia’s policies and experience in economic development and industrialisation has become a template for many developing countries. Vietnam may avail on Malaysia for assistance, particularly in infrastructure development and construction, as well as the electronics industry.

 

Malaysia-Vietnam diplomatic relations have matured after 40 years, and 2013 is a special year to mark significant achievements between the two countries. Both countries have instituted similar policies and have created favourable conditions to boost bilateral cooperation for mutual benefit, as well as to contribute to a sustainable ASEAN community.

 

It must be underlined that the two countries have been enjoying fruitful relations for the past four decades and these relations have improved from strength to strength over the years. However, there is a multitude of areas where cooperation could further be enhanced. If we look at trade figures, we can easily infer that trade relations between Malaysia and Vietnam are good but still not at a satisfactory level. Being neighbours and complementary in many ways, perhaps the figure should have breached the US$10 billion mark some time ago.In this regard, Malaysian and Vietnamese businesses could look beyond the limits of the ordinary and come up with additional areas of trade (and investment) cooperation.

Malaysia certainly wants to play a significant part in Vietnam’s development. This can be seen in the vast amount of investment from Malaysian companies in the oil and gas sector, the property development sector, as well as related activities. Large Malaysian GLCs and public-listed companies have been present in Vietnam for many, many years and these include Petronas, Berjaya, Gamuda, SP Setia, Sunway and WCT Engineering.

Another sector that Malaysia would like to be more involved with is ICT, as there is an abundance of ICT companies in Vietnam that offer manifold opportunities for Malaysia, in software solutions for e-government, education, banking, content development and entertainment-related applications, to name a few.

In recent years, Vietnam has given much priority to improving the investment environment for infrastructure development projects, such as for roads, ports and airports. The monorail and underground project is also underway. This transport infrastructure network would eventually form the main arterial system of the nation and a necessary prerequisite for further attracting foreign investment, as well as crucial to the nation’s development.

It is also apparent that great efforts are being made to improve the country’s administration. However, this process needs to be seriously continued and further enhanced in order to fight corruption and avoid malpractices that hamper the course of national development.

A clean investment environment and clear investment policies will inevitably raise Vietnam’s profile as a viable global investment destination.

I have lived and worked in Vietnam for only a year and five months, but I shall try to respond to this question based on the time I have spent in the country.

Vietnam has vast potential and we have seen the shift in foreign investments from countries like my own to this part of Southeast Asia in the last two decades. As countries like Malaysia slowly lose their competitive edge, owing to higher labour, land and other costs resulting from rapid economic development and industrialisation, many foreign investors have seen it fit to relocate their enterprises to countries like Vietnam, Cambodia, Laos, and now, Myanmar. However, as a result of many factors in the last few years and even though Vietnam seems very attractive to foreign investment, the Vietnamese economy has been somewhat stagnant. Perhaps the focus on nation-building and national development should again be made paramount on the political agenda.

 

Another factor which I find might be instrumental in impeding economic growth is the absence of actual legislation to facilitate various areas of development crucial to foreign investment. For instance, a legal framework on affordable housing is absent in a country that should be focusing on affordable housing for the masses. This absence may be responsible for hampering the flow of foreign investment in this particular area, as the business climate may not be quite conducive to potential foreign investors.

 

In this regard, legislation, any legislation, should go through a rigorous process of debate and reconsideration before it can be passed by the national assembly and endorsed by the leadership. In this regard, a series of decrees may not be quite the answer or substitute for proper legislation. The prerequisites for the enactment of a law should be empirical study and tireless deliberation.

 

Moving away from these more sober matters, I find Hanoi to be a charming city with friendly people with a more provincial outlook. I enjoy Vietnamese food greatly and find it refreshing and healthy. In fact, I enjoyed Vietnamese food long before I even came to Vietnam and would crave good Pho Bo and Nem from time to time.

I find that Hanoi and Ho Chi Minh City (HCMC) are very different. Hanoi appears to be more easy-going, while HCMC seems to bustle like any other large city in the region. However, my favourite is still Danang!