Singapore and Vietnam Witness Strengthened Ties

8:41:39 AM | 2/24/2022

Despite negative effects from the health crisis, leaders from Vietnam and Singapore have explored further solutions to beef up their strategic partnership during the state visit from the former, with a focus on trade and investment ties strongly increasing thanks to a connectivity initiative.

Many Singaporean businesses are performing well in Vietnam, contributing to further sharpening the two countries’ strategic partnership

For many years, with ever-increasing regional integration, Vietnam and Singapore have been strengthening their fine multifaceted co-operation. This year, both nations are set to exchange some high-level visits with the aim to foster bilateral trade and investment cooperation backed by the Singapore-Vietnam Connectivity Framework Agreement.

The deal, which was established in 2006, covers six key sectors: education and training, finance, IT and telecommunications, investment, trade and services, and transportation.

Last November, Singaporean Minister for Manpower and Second Minister for Trade and Industry Tan See Leng co-chaired the 15th Singapore-Vietnam Connectivity Ministerial Meeting with Vietnamese Minister of Planning and Investment Nguyen Chi Dung, reviewing the progress across these six sectors.

During the meeting, both ministers acknowledged the challenges posed by the COVID-19 pandemic on both countries’ economies and reaffirmed their commitment to further strengthening the bilateral economic partnership in order to position both economies for recovery.

The ministers also discussed potential opportunities for bilateral cooperation in emerging areas, including renewable energy, digitalisation, and innovation. Minister Leng noted that Singaporean companies’ expertise in renewable energy could support Vietnam’s transition towards a green economy, especially given its vast potential in solar and wind power. Singapore companies could also help provide digitalisation solutions to support Vietnam’s shift towards high technology and higher value-added industries.

According to the Vietnamese Ministry of Foreign Affairs (MoFA), Vietnam’s State President Nguyen Xuan Phuc and his spouse will be leading a high-ranking Vietnamese delegation to Singapore for a state visit from February 24-26, 2022, at the invitation of Singaporean President Halimah Yacob.

It is expected that both sides will highlight the trade and investment ties under the Singapore-Vietnam Connectivity Framework Agreement as one of the key pillars in the two nations’ bilateral relationship activities in this year.

It is also expected that both sides will organise a business promotion conference with the participation of hundreds of Vietnamese and Singaporean enterprises and investors.

Expanding ties

“Our bilateral economic ties are reinforced by the fact that Singapore and Vietnam are like-minded in the pursuit of greater regional and international economic integration. For instance, we have worked closely within ASEAN to promote the ASEAN Economic Community, including during Vietnam’s ASEAN Chairmanship in 2020,” said Singaporean Ambassador to Vietnam Jaya Ratnam.

According to Ratnam, both countries are strong supporters of next-generation free trade agreements, such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), and are also the only two ASEAN countries that have a free trade agreement with the European Union. In addition, after many years of painstaking negotiations, the Regional Comprehensive Economic Partnership was signed under Vietnam’s ASEAN chairmanship in 2020.

It is expected that Vietnam’s Bamboo Airways will launch the Vietnam-Singapore route from March 24, 2022, as part of the carrier’s plan to expand its international network to 40 this year.

The move is to meet a growing travelling demand and help beef up both nations’ economic recovery.

“Singapore is one of the aviation with special importance for Vietnam, with the number of passengers visiting Vietnam ranking sixth (under data from 2019 when COVID-19 had yet to cause serious aftermath),” said the MoFA on the Vietnam-Singapore relationship released on this Tuesday. “Currently airlines of Vietnam and Singapore have resumed regular commercial flights between the two countries with an agreed frequency of 14 flights per week for each nation.”

This is expected to help Vietnam and Singapore to increase their bilateral investment and trade cooperation within the strategic partnership forged in September 2013.

Figures from the MPI showed that as of January 20, Vietnam attracted 92.37 billion USD in registered investment capital from ASEAN member states, with Singapore taking the lead (65.23 billion USD), followed by Thailand (13 billion USD), Malaysia (12.85 billion USD), the Philippines (615 million USD), Indonesia (611.7 million USD), and Laos (71.1 million USD). Singapore was also Vietnam’s second biggest foreign investor so far, after the Republic of Korea (77.32 billion USD).

The average investment capital for each Singaporean project is more than 23 million USD, notably higher than the average investment capital of 11.9 million per foreign-invested project in Vietnam.

In 2021, Singapore was Vietnam’s biggest foreign investor with total registered capital of over 10.7 billion USD, accounting for 34.4% of Vietnam’s total registered foreign direct investment.

On its website, Enterprise Singapore, which is the Singaporean government agency championing enterprise development, said that Vietnam has been one of Southeast Asia’s fastest growing economies. In 2020, Vietnam recorded GDP growth of 2.91%, making it one of the few countries in the world to achieve positive economic growth amid the COVID-19 pandemic. This was largely attributed to Vietnam’s early decisive steps to contain the health and economic fallout from COVID-19, as well as its diversified export markets, which include the US, EU, China, ASEAN, Japan, and the Republic of Korea.

The government has also made concerted efforts to make it easier to do business in Vietnam, the latest of which include amendments to the Law on Enterprises and Law on Investment and the approval of a new Law on Public-Private Partnerships in 2020.

“Hence, Vietnam is also an increasingly preferred choice for many manufacturers, especially those adopting a “China Plus One” strategy to diversify their supply chains,” Enterprise Singapore said.

In late June last year, the Mekong Delta province of Bac Lieu announced that Singapore’s Delta Offshore Energy Pte. Ltd. – the investor of the 4-billion USD liquefied natural gas (LNG) power plant – has established Bac Lieu Gas Power Co., Ltd., and is expecting to complete its facility in 2027.

Over the past few years, Singaporean investors have diversified their presence in Vietnam through various ways. Infrastructure solutions for urban development are among the typical sectors in the bilateral ties. Since the first Vietnam-Singapore Industrial Park (VSIP) was established 26 years ago in the southern province of Binh Duong, many more VSIPs have been established throughout Vietnam.

In real estate, new initiatives have been made despite the health crisis, with Pegasus Investment and Consultancy JSC – an education institution from Singapore – and Banyan Tree Hotels & Resorts inking a hotel management agreement in April 2021 to operate Dhawa Quy Nhon Vietnam. Other notable names include CapitaLand and Mapletree.

In addition, energy is another strong expertise of Singapore. In March 2021, the 3.1-billion USD LNG Long An I and II gas power project, with investment from VinaCapital GS Energy Pte., Ltd. of Singapore, received their investment certificates.

In 2019, clean energy provider Sunseap developed a 150-million-USD utility-scale solar farm in the south-central province of Ninh Thuan.

Banking in Vietnam is also a magnet for Singapore. For example, Maybank Hanoi began full commercial banking services in Vietnam in October 1995. In March 1996, it expanded its coverage by opening a representative office in Ho Chi Minh City. In April 2005, Maybank obtained a second license from the State Bank of Vietnam to upgrade the representative office to a full-service branch. The new branch at Ho Chi Minh City commenced operations in October 2005.

Meanwhile, despite COVID-19, total trade between Vietnam and Singapore hit 8.3 billion USD last year, up 23.3% on-year. It is estimated that in January 2022, the figure hit 783.9 million USD, up 6.8% as compared to that in the same period last year.

Bright prospects ahead

Indeed, there are good reasons to be optimistic about the two countries’ future bilateral economic ties. Even as they are facing the challenges brought about by COVID-19 and rapid technological change, new prospects have emerged.

For example, in the education sector, school closures have pushed education providers to adopt e-learning solutions. This has created an emerging market for Edtech solutions.

There are also increasing opportunities for collaboration on e-commerce and e-payments. Many enterprises and consumers have pivoted towards online shopping and contactless transactions due to the impact of COVID-19 on traditional means of conducting business. In turn, this has opened the digital domain for companies of all sizes to provide better and more seamless online services, both within countries and, crucially, across borders.

In addition, there are also openings for Singapore and Vietnamese businesses to capitalise on supporting industries for e-commerce, for example in logistics solutions.

Furthermore, Vietnam and Singapore are also driving digitalisation in smart cities, Industry 4.0, e-government, cybersecurity, AI, and cloud technologies. As the economic landscape shifts, there remains much potential for Singapore and Vietnam to further expand and deepen their trade and investment ties.