FDI

VSIP: The Implications for FDI and Trade Promotion Between The Countries

Nora Setiawan

November 2, 2020

FDI

VSIP: The Implications for FDI and Trade Promotion Between The Countries

Nora Setiawan

November 2, 2020

The relations between Singapore and Vietnam had grown so strong and symbolized the establishment of Vietnam-Singapore Industrial Park (VSIP) which was built in 1996. Later, VSIP has attracted billions in investments from so many companies. You may ask yourself, why this is such a big deal or what are the benefits for both countries. Thus, in this article you will find out about the overview of VSIP itself, also the implications and the challenges for FDI and trade promotions between two countries!


Overview of Vietnam-Singapore Industrial Park (VSIP)

As mentioned above, VSIP itself was founded based on the friendship and economy between the two countries. 

The support from two countries’ governments has brought a joint investment between the domestic and foreign partners with reputable corporations in the sectors of infrastructure development and real estate. For instance, a Vietnamese company Becamex IDC Corporation and Singaporean company ‘Sembcorp Development’ were established to accomplish the VSIP project.

Over the last two decades, VSIP has developed a total of 9 projects across the country with the land fund of more than 8.600 hectares for the industrial, residential, and services industries. VSIP has drawn a total investment of 14 billion USD from more than 30 countries and supplied the production infrastructure to 840 clients. In addition, it has created direct jobs for more than 250.000 domestic and foreign workers.

Besides helping to drive a value-added economic transformation through the international manufacturers, VSIP has also delivered a societal impact to its local communities across Vietnam.

For example, VSIP has a charity event every year, to raise money to support foster homes, schools, and even provide the scholarships for the unfortunate students in the area. Not only for the charity purpose, but it also attracts thousands of Industrial Park workers to gather and enjoy the entertainment.

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The Implications for FDI and Trade Promotions Between Two Countries

In 24 years of operations, VSIP has attracted 553 projects, with a total investment of around 8.5 million USD in 9 Industrial Parks Vietnam-Singapore. Since last year, the FDI in these two countries has continued to increase sharply, and back in 2018, Industrial Park itself had attracted over 696.2 million USD, it was up 78.93% and equal to 199% if it’s compared in 2019.

There are also many huge FDI projects that have officially set in. For instance, Tata Coffee Vietnam Co., Ltd., the instant coffee factory which is invested by TATA Group, India, has just successfully opened. 

The instant coffee project has a total investment of 65.5 million USD, and established in an area of 80.000 m² in VSIP II Industrial Park (Bac Tan Uyen District – Binh Duong). The cold-drying coffee factory has a capacity of 5.000 tons per year to supply the global market with the latest instant coffee varieties.

With the COVID-19 situation this year, Vietnam still becomes an attractive destination for Singaporean investors. According to the Cong Thuong Newspaper, Vietnam has an important role in the regional and worldwide economy as the country has successfully controlled the COVID-19 and has cautious actions to constrain the pandemic from spreading across the country. As of a result, Vietnam has become an attractive investment destination for Singaporean companies even during this pandemic.

Singapore is currently Vietnam’s third-largest foreign investor, with a total registered capital of more than 55 billion USD. In the first eight months, the investors were pouring 6.54 billion USD into Vietnam, or it can be said that it is 33.5% of the total FDI during the period.

One of many Singaporean firms, Sembcorp Development has long been in Vietnam and worked with Becamex IDC Vietnam to establish the VSIP joint venture.

Furthermore, there is the latest construction project of 143 million USD and will be founded in Binh Dinh, Vietnam. The project will be held by Becamex VSIP Binh Dinh Industrial and optimised to be a great prospect in promoting the development of Binh Dinh’s industry.

The commencement event of Becamex VSIP Binh Dinh Industrial has marked a new milestone on 27 September 2020. The event itself is not only meaningful for Binh Dinh province, but also playing an important role in the economic development of both the South Central Coast and the Central Highlands.

According to the economic plan, the Becamex VSIP Binh Dinh project will attract about 2 billion USD to invest in industrial projects. It is also believed that, once it’s operating, the Industrial Park will draw 120.000 to 150.000 locals and neighborhoods.

Besides, the Binh Dinh project, Logos, which was acquired by Singapore’s ARA Asset Management early this year, officially entered Vietnam in August. The project of a 350 million USD joint venture with an unspecified institutional investor is believed to be a Guaranteed Investment Certificate (GIC).

Its first project is under its new joint venture, Logos has selected a site in Sembcorp’s VSIP along with National Highway 1A in Bac Ninh province. The choice of its location will keep Logos close to the company with the facilities from major international logistics providers, including FM Logistic, Emergent Cold, LinFox and DB Schenker.

Apart from the investment, bilateral trade also surged to 21 billion USD last year. The export structures are complementary, also an optimal condition for agricultural, aquatic, and food products of Vietnam to expand their market shares to the city state.


The Challenges of FDI and Trade Promotion Between Both Countries

Cam Dien – Luong Dien Industrial Park has officially been acquired by VSIP, but the project somehow still faces many difficulties from the people in the areas.

Chairman of Cam Giang District People’s Committee has provided information about the implementation of the infrastructure construction project of Cam Dien – Luong Dien Industrial Park. However, there is an obstacle to abort the construction, for example, many people from the area have planted bananas in the industrial park and they gather around 50 people to protest outside the gate, bring the flags and banners.

Moreover, the number of people gathering and obstructing construction keeps increasing. These households are in the group of families that have not received the compensation money because their lands have been acquired within 150 hectares and taken over by Phuc Hung Company Limited.

Representatives of VSIP Nghe An Industrial Park said the leaders of the province Hung Nguyen district, were trying to solve the problems in land clearance, land allocation, land tax, land filling, planning, and the relocation of these lands. 

Based on Phase 1A urban area of VSIP Nghe An Co., Ltd. allocated the land in April 2020, and in Decision No. 79 and No. 80 / QD-KKT on April 21, 2020 of the Southeast Economic Management Board, Ru Ruim land mine is difficult to be cleared.

Furthermore, WHA Industrial Zone 1 Nghe An Industrial Park is also instructed to solve the problems in the industrial areas and hand over them to the company as soon as possible.

There are many advantages of the establishment of VSIP between both countries, especially for FDI. Besides its symbol of two countries’ relationship, it also can attract many investors, create new jobs for domestic and international workers, and drive the economy of both countries!

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