Singapore Leads FDI in Vietnam

The relationship between Vietnam and Singapore has been witnessing fine progress. The two countries entertain friendly cooperative relations in many fields, especially in investment. In recent years, Vietnam has witnessed the increasing flow of foreign direct investment (FDI) from Singapore. At present, Singapore remains the leading foreign direct investor in Vietnam.

According to the Ministry of Planning and Investment, by the end of August 2005, Singapore will have 366 valid projects in Vietnam, totalling US$8.1bil. Singaporean invested projects have average capital of $22.2mil per project, well exceeding the average level of foreign invested projects in Vietnam ($8.8mil per project).

However, figures released by the Ministry of Planning and Investment’s Foreign Investment Agency (FIA), revealed that of the $8.1 billion in capital registered by 366 Singaporean projects, roughly $4.8 billion remains to be spent. This amount is a significant figure for Vietnam, accounting for 58.7 per cent of Singapore’s total committed FDI capital in the country.

Singapore currently ranks first among foreign investors in Vietnam, followed by Taiwan, Japan and South Korea who recorded respective disbursements of 38 per cent, 70 per cent and 52 per cent, according to FIA statistics.

Singapore’s projects in Vietnam have been typically associated with industries in which they can claim a competitive edge. The service sector soaked up $5.2 billion, or more than 64 per cent of the total committed capital from Singapore, despite just 153 projects in the area compared with the 180 established in the industrial and construction sector, which had absorbed $2.7 billion by the end of July.

The southern key economic zone continues to remain the most attractive destination for Singaporean investments, with Ho Chi Minh City, Dong Nai and Binh Duong pulling in 247 projects by the end of July, and courting almost $3.4 billion in committed capital. Hanoi remains the top single draw for Singaporean investors, with 47 investment projects worth $2.97 billion registered by the end of July.

A recent survey on the global business environment conducted by BT – Global Business Insights shows that Vietnam is the second choice for Singaporean companies for the next two years, after China. Vietnam has high population growth, 60 per cent of which is young, promising a potential market for housing. However, Singaporean investors prefer to wait for Vietnam’s official membership in the WTO to bump capital into the projects and are watching progress closely.