As two prominent economic powerhouses in Southeast Asia, Vietnam and Singapore have forged a strategic partnership that spans across various sectors. In this blog post, we will explore the key aspects that make this bilateral relationship thrive, including trade volumes, investment flows, collaborative initiatives, and mutual benefits. Join us as we delve into the dynamic and prosperous trade and investment landscape between Vietnam and Singapore, uncovering the vast opportunities that await those seeking to capitalize on this flourishing partnership.
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. In April 2021, Prime Minister Pham Minh Chinh and his Singaporean counterpart Lee Hsien Loong decided to strengthen their cooperation during 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 16 Connectivity Ministerial meetings that have been held between both country’s ministers.
Overall, the bilateral relations between the two countries have been effectively maintained and enhanced, particularly in the field of trade and investment.
Vietnam Singapore Industrial Park – Binh Duong
Foreign Direct Investment (FDI)
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 the first two months of 2023, Singapore maintained its position as the largest foreign investor in Vietnam among the 51 countries and territories investing in the country. With a contribution of 978.4 million USD, Singapore accounted for approximately 31.6% of the total registered Foreign Direct Investment (FDI) in Vietnam. The nine Vietnam – Singapore Industrial Parks have epitomized the effectiveness of Singapore’s direct investment in Vietnam: VSIP 1, VSIP 2, and VSIP 3 in Binh Duong, VSIP Bac Ninh , VSIP Hai Phong, VSIP Quang Ngai, VSIP Hai Duong, VSIP Nghe An and VSIP Becamex Binh Dinh .
Singapore remains a top investor in Vietnam, holding the leading position among ASEAN countries and ranking second out of 141 countries investing in Vietnam as of December 2022. Singapore's investments are spread across 51 out of Vietnam's 63 provinces and cities. On the other hand, Vietnam has 140 valid investment projects in Singapore, with a total registered capital of over $586 million.
By December 2022, Singapore had invested in 18 diverse industries, leading to an 11.6% increase in the import-export turnover between Vietnam and Singapore compared to the previous year. However, given the overall economic decline in 2023, sustaining or surpassing the trade growth achieved in 2022 will present significant challenges. Despite the complex global economic landscape, the progress made by Singaporean investors in terms of investment cannot be overlooked.
Singapore's investment impact in Vietnam has remained strong and consistent, with the country being a frontrunner among the pioneering ASEAN nations in exploring Vietnam's investment market since the 1990s.
HSBC has recently released the results of a large survey of nearly 1,600 companies from six of the world’s largest economies all of which have operations in Southeast Asia - The HSBC Navigator: Southeast Asia (SEA) in Focus Survey. It highlights Vietnam’s skilled workforce, economic resilience during the COVID-19, and how the country is rising as a global production hub due to government incentives and the signing of free trade agreements among many other boons. These highlight the positive investment environment in Vietnam, emphasizing on the advantages of Vietnam and Singapore trade and investment relations.
Trade
Over the past decade, bilateral trade between Singapore and Vietnam also saw a steady rise. Singapore and Vietnam have shared close and long-term economic relations, and their two-way trade grew steadily in the past decade, hitting 31 billion SGD (over 22.9 billion USD) in 2022. Vietnam's exports to Singapore amounted to $3.89 billion in 2021. The primary products that Vietnam exported to Singapore included Integrated Circuits ($469 million), Broadcasting Equipment ($405 million), and Crude Petroleum ($283 million). Over the past 26 years, Vietnam's exports to Singapore have grown at an average annual rate of 8.98%, starting from $416 million in 1995 and reaching $3.89 billion in 2021. In contrast, Singapore's exports to Vietnam in 2021 reached $8.11 billion. The main products Singapore exported to Vietnam were Refined Petroleum ($893 million), Ethylene Polymers ($552 million), and Integrated Circuits ($507 million). Over the same 26-year period, Singapore's exports to Vietnam have increased at an average annual rate of 6.02%, starting from $1.78 billion in 1995 and reaching $8.11 billion in 2021.
Opportunity and Challenges
Opportunity
In 2022, Singapore and Vietnam signed five agreements and several MOUs to strengthen their cooperation in various sectors including trade, digital economy, cybersecurity, clean energy, sustainable development, and intellectual property rights. Both countries actively engage in trade liberalization agreements and multilateral pacts to enhance their economic ties.
Recently, On February 9, 2023, Singapore and Vietnam solidified their economic cooperation by signing multiple MoUs. These MoUs aim to strengthen collaboration in various sectors such as trade, the green-digital economy, as well as maritime and port cooperation. The signings took place during the official visit of Vietnamese Prime Minister Pham Minh Chinh to Singapore, witnessed by Singapore Prime Minister Lee Hsien Loong. Notably, one of the MoUs focuses specifically on economic trade and cooperation, building upon a previous agreement signed between the two nations in February 2022.
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.
Challenges
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. Ranking 113th in 2016, in the Corruption Perceptions Index, The Government took the initiative to 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. By tackling this severe issue effectively, their efforts have drastically improved the situation, increasing their CPI ranking to 77th in 2022 amongst 180 economies.
Conclusion
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 the 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.
