Vietnam has become an emerging economy in Southeast Asia with a lot of improvements and achievements in diplomatic relations and integration policies. Not only that, many foreign investors, especially Singapore are interested in investing in Vietnam for various sectors, from manufacturing, real estate, energy, retail and construction, arts, tourism, and entertainment. But, what happens after the COVID-19 hits the global economy? However, FDI could play an important role in supporting economies during a hard time, but there might be some changes. Thus, the article provides you with information about the FDI trend between Vietnam and Singapore in times of COVID-19!
Overview of FDI Between Both Countries From Q1 2020 Until Now
Vietnam has long been appreciated for its safety, political, and economic stability in the business environment. It is indeed strengthened when Vietnam is becoming one of the few countries in the world that won the COVID-19 battle by recovering the production and business activities.
These actions in maintaining economic activities during a hard time will significantly improve its reputation in the eyes of foreign investors, especially Singaporean investors.
Back in January 2020, Vietnam raised the foreign ownership cap in domestic airlines, and it gained the assumption that the firm’s benefit from start-up registration which was expanded access to credit legal protection has compensated for the additional costs. However, the benefits of the ease of start-up regulation in Vietnam added the value of the firms increased by 20% on average.
Also this year, Singapore leads with total investment capital of 6.77 billion USD, accounting for 32% of total investment capital in Vietnam. The number has beaten other countries, such as South Korea with total investment capital of 3.17 billion USD, and China with a total registered investment capital of 1.87 billion USD.
There were some major deals in the first six months, including e-commerce Tiki which raised $130 million from a group of investors led by Singapore-based equity fund Northstar Group.
Then, in September 2020, Vietnam and Singapore have some major projects together, for instance, Bac Lieu Liquefied Natural Gas (LNG) Power Plant Project under LNG Bac Lieu Thermal Power Center (Singapore), with registered investment capital of 4 billion USD. It has a purpose to produce electricity from liquefied natural gas LNG. The other office project at 29 Lieu Giai (Singapore) adjusted to increase investment capital by an additional 246 million USD.
Based on the fact that Singapore and Vietnam projects have been going well, thus the Ministry of Planning and Investment has organized online investment promotion conferences to attract more foreign investors to invest in Vietnam.
Due to the pandemic, Vietnam still continues to restrict the entry of all foreigners, except the diplomats, high-skilled workers, and investors with very strict health protocols.
Guidance for FDI Investors to Cope with COVID-19’s Impact
From October 8, 2020 Singapore has lifted the border restrictions on visitors from Vietnam, it means there won’t be an obstacle for Vietnamese investors to expand the markets in the country. As well as, the visitors who only want to spend their time there.
However, there is a regulation that Vietnamese visitors need to pay attention to when entering Singapore. The Singaporean authorities said that Vietnamese visitors that come to Singapore from October 8, 2020 will have to submit an online application for entry approval from at least 7 ro 30 days before the entry date.
They also are required to undergo the Covid-19 test upon arrival and install the Covid-19 tracing application in their mobile devices. If the test result is negative, the visitors are free to travel within Singapore. Otherwise, visitors have to be treated in Singapore and bear all the medical expenses.
According to the President of The Singapore Manufacturing Federation (SMF), Douglas Foo stated that Singaporean firms have high expectations for Vietnam’s business environment because Vietnam is currently home to over 32.000 projects worth US$381 billion from 137 countries and territories, in which Singapore is Vietnam’s third largest investor with US$55 billion in investment capital.
The investment cooperation between Vietnam and Singapore would complement each other and serve mutual benefits. Furthermore, the majority of Singaporean first in Vietnam are large-scale, and the opportunities remain abundant for those of small and medium enterprises. Hence, the FDI projects between both countries in the times of COVID-19 are still big and even have more chances to be even greater.
What does The Future Hold for Both Countries Next Year?
As we know that Vietnam and Singapore’s investments are complementary to each other. Also, Vietnam has been seen as a rising star for high technology and it attracts Singaporean investment in the near future.
The Vietnamese government would encourage Singapore’s investment in fields of hi-tech, manufacturing, supporting industries, high quality services, privatization of state firms, as well as setting up innovation and R&D centers.
Singapore also has advantages in finance, knowledge, and technologies, at this point Vietnam could support this expertise with a large market, land and human resources. As a result, Singapore will innovate in the manufacturing sector in Vietnam and internationally as well.
Based on the Singapore Business Federation for HSBC survey, there are 1036 companies interested in overseas expansion. 86% of them are SMEs which are defined with an annual turnover of S$100 million or less than 200 workers. 76% already have operations in Vietnam and 30% of them expected to expand their businesses in Vietnam in the next two years.
Vietnam’s growing consumer market and the investment climate are the key drivers for future inbound investment. Still, on the survey, 81% of respondents are planning to invest or expand in Vietnam, since it cited a potential consumer demand. Meanwhile, 75% highlighted the overall investment climate and 63% pointed to business costs.
Singaporean corporations recognized Vietnam’s growing consumer market, and they are now looking to double down on Vietnam’s demographic dividend. Beyond the consumer market, Vietnam’s manufacturing is strong too, and today it is entering into the higher-end space.
No surprise, if Vietnam has been acknowledged as a top destination for investment in the next 12 months because 55% of investors have already selected Vietnam as their first priority, and followed by Indonesia which gained 42%.
In conclusion, there was a hard time for the global economy, but both Vietnam and Singapore can gradually resume their economic activities. Their investments are complementary to each other, and inspire other countries to invest or expand the businesses internationally.