Overview of Vietnam and Singapore relations
Ever since Singapore and Vietnam set up their formal bilateral diplomatic relations in August 1973, their relations have been strongly tightened. The two countries have signed several frameworks with regards to a variety of sectors, in order to strengthen their bilateral friendship and multifaceted cooperation. Multiple official visits between the leaders of two nations, including bilateral visits and meetings at multilateral forums such as ASEAN and APEC meetings, have also taken place. Recently, during a phone call in April, Prime Minister Pham Minh Chinh and his Singaporean counterpart Lee Hsien Loong decided to strengthen their cooperation in the war against the Covid-19 Pandemic, as well as continue to further boost the bilateral relationship.
Trade and investment links between Vietnam and Singapore
Trade and investment relations between Vietnam and Singapore have been a significant factor in forging robust bilateral ties. In this regard, it is crucial to mention the highlight of the bond between these two ASEAN powerhouses: the Singapore – Vietnam Connectivity. Established in 2006, the SVCFA is an annual platform that plays a key role in the mission of maintaining the economic bilateral relations between Vietnam and Singapore.
Ever since the implementation of the SVCFA, a conducive environment with various investment opportunities in Vietnam for Singaporean business has been incubated. Annual Connectivity Ministerial Meetings are also organized in order to review the progress of the six sectors of cooperation under the framework, namely, education and training, finance, information technology, and telecommunications, investment, trade and services, and transportation. Hitherto, there have been 14 Connectivity Ministerial meetings that have been held between both country’s ministers. The 15th Vietnam-Singapore CMM is expected to be organized in the latter half of 2021 by Vietnam’s Prime Minister Pham Minh Chinh.
Overall, the bilateral relations between the two countries have been effectively maintained and enhanced, particularly in the field of trade and investment.
Throughout the years, Singapore has maintained its firm position/standing as one of the partners that invest in Vietnam in the most robust volumes. Singapore’s direct investment in Vietnam has increased steadily since 1998, especially in sectors such as real estate, processing, manufacturing, and construction. In 2017, Singapore was the third-largest investor of Vietnam, with USD 43.2 billion spread across 1,800 projects.
Recently, in 2020, foreign direct investment (FDI) from Singapore topped Vietnam’s total inward inflows with nearly US$9 billion, accounting for one-third of Vietnam’s total foreign investment. Until the first four-month of 2021, Singapore finally earned its spot as the largest foreign investor in Vietnam with a total investment of over USD4.8 billion, accounting for nearly 39.6 percent of the total foreign investment to Vietnam. The seven Vietnam – Singapore Industrial Parks have epitomized the effectiveness of Singapore’s direct investment in Vietnam: VSIP 1 and VSIP 2 in Binh Duong, VSIP 3 in Bac Ninh (12/2007), VSIP 4 in Hai Phong (01/2010); VSIP 5 in Quang Ngai (9/2013); VSIP 6 in Hai Duong (8/2015) and VSIP 7 in Nghe An (9/2015).
According to a survey by the Singapore Business Federation for HSBC, Vietnam is among the top 3 destinations for Singapore FDI. 76 percent of 1036 companies asked have already invested as a foreign business in Vietnam, whilst 30 percent of which expect to set up business in Vietnam within the next two years.
Over the past decade, bilateral trade between Singapore and Vietnam also saw a steady rise. Bilateral trade between the two neighbors reached USD19.8 billion and USD21.6 billion in 2016 and 2017, respectively. Singapore is Vietnam’s sixth trading partner, while Vietnam is its counterpart’s twelfth largest trading partner. The highest growing commodities in trade are electrical, electronic equipment, mineral fuels, oils, distillation products, grease, leathers, tobaccos, glass products, seafood, and vegetables. In 2018, the value of Vietnam’s export in electrical, electronic equipment to Singapore already reached $967.86M. In 2019, mineral fuels, oils, and distillation products exported to Vietnam from Singapore amounted to a remarkable value of nearly USD1.66B.
Opportunity and Challenges
With a fast-growing economy, Vietnam offers numerous business opportunities for Singaporean companies in various sectors, namely manufacturing, consumer services, hospitality, food processing, infrastructure, real estate, high-tech manufacturing. With an appealing market profile – low-cost labor, rapid-growing economy, strategic location, and among other strengths, Vietnam is undisputedly an appealing target for Singapore partners to establish businesses.
Despite the positive characteristics of the Vietnam trade and investment market, foreign businesses still face numerous challenges, particularly regarding corruption and inadequacy of Vietnam Intellectual property law. In the recent 2016 Corruption Perceptions Index, Vietnam ranked 113th amongst 176 economies. The issue is so severe that the government has come up with several relevant legal actions such as giving out approval for the law of accessing information, revising the law on anti-corruption, and incorporating the United Convention against Corruption (UNCAC) regulations.
Singaporean businesses have steadily remained in Vietnam’s long-term economic prospects and participated actively in various sectors in different parts of Vietnam. So far, Vietnam – Singapore relations have continued to develop in a positive manner, making significant contributions to the process of industrialization and modernization of Vietnam.
If you are Singaporean investors who need support with setting up a company in Vietnam, please contact Viettonkin consultant team via email or contact page. With our specialized knowledge and experience in helping foreign enterprises’ getting into the Vietnamese business environment, we can provide detailed advice on procedures, stages, and documents required to prepare for the application of a Vietnam business registration certificate.