Ample Potential for Trade Ties

Singapore is Vietnam’s fifth-largest trading partner in ASEAN and its 15th-largest trading partner in the world. Besides the advantages of logistics and a diversified commodity structure, Vietnam and Singapore are the only two countries in the region that have free trade agreements (FTAs) with the EU and the UK, creating ample potential for trade cooperation.

Minister of Industry and Trade Nguyen Hong Dien(R) and Singapore’s Minister of Labor and Second Minister of Industry and Trade Tan See Leng agree on specific measures to implement the MoU on economic and trade cooperation during their meeting in Hanoi, August 2022

Trade growth is stable

Singapore is a high-income economy. The city-state is a vital international free trade zone and a transshipment hub, thanks to its top-notch logistics and shipping services. Singapore has a flexible and open legal framework that fosters economic development. Singapore, where 70% of imported items are re-exported, is a promising market for Vietnamese goods. Vietnam-Singapore trade relations have been growing steadily and consistently over the years. The Comprehensive Economic Partnership Agreement, signed between Vietnam and Singapore in December 2020, has opened up significant trade opportunities. The total import and export turnover between the two countries has increased continuously in recent years, reaching US$9.1 billion in 2022, an increase of 11.6% over the same period in the previous year. For traditional markets like Singapore, Vietnam’s commodity structure is generally sustainable. High-value processed products accounted for 67-76% of export turnover, while mineral fuels accounted for 5.5-13%. Singapore has no natural resources and depends heavily on imports of raw materials, making it a potential market for Vietnam’s core products such as agricultural products, fisheries, textiles and processed foods. On the other hand, Vietnam imports processed and manufactured products, computers, electronic devices and components, chemicals, cosmetics and sanitary items, plastic raw materials and machinery from Singapore.

Vietnam has become a key link in the main economic ties in the region, with 16 FTAs, including several new generation FTAs such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and Regional Comprehensive Economic Partnership (RCEP). Vietnam and Singapore also have FTAs with the EU and the UK. These FTAs enable the two countries to deepen their cooperation, jointly access third markets, leverage their brand values and develop mechanisms for logistics and e-commerce cooperation. Singapore is a small country with a population of less than 6 million, but its consumption level through e-commerce platforms is comparable to Vietnam’s market of about 100 million people. Consumers in Singapore rely more on e-commerce than consumers in other countries due to their high work intensity, convenient and secure payment platforms and good internet speed. According to the Ministry of Industry and Trade, more Vietnamese enterprises are entering Singapore’s e-commerce platforms through intermediary service providers.

Solutions to promote trade

To expand new markets and increase bilateral trade turnover, Vietnamese and Singaporean firms should enhance their exchange of connections, market surveys, brand development and collaborative distribution. Vietnam has a competitive edge in producing agricultural products, textiles and electronics, while Singapore has an edge in petroleum, chemicals and industrial products. Increased cooperation between the two countries in providing high-quality products and services will help boost exports and imports. According to the Ministry of Industry and Trade, enterprises should also strengthen their cooperation in quarantine and testing procedures to comply with the standards of both countries and reduce risks in exporting agricultural, forestry, aquatic and processed food products. Moreover, the two countries should intensify their brand promotion to attract new partners and customers.

Furthermore, Vietnam and Singapore should cooperate closely in multilateral economic and trade organizations, taking full advantage of the CPTPP and RCEP to which both Singapore and Vietnam are parties. E-commerce is growing rapidly worldwide, offering an opportunity for businesses in Vietnam and Singapore to enlarge their markets and increase their export and import activities. Therefore, businesses in both countries should invest in and develop e-commerce infrastructure, as well as facilitate businesses’ participation in this field.

Huong Ly, Vietnam Business Forum