Vietnam and Singapore to strengthen business ties

Both countries' economies remain attractive to each other despite hurdles like TPP woes

Stakes in Vietnam’s biggest dairy firm Vinamilk are up for sale this year, marking the acceleration of the country’s privatisation drive. PHOTO: REUTERS

Singapore and Vietnam business ties are set to deepen further, with firms here increasingly headed to the fast-rising nation while Vietnamese firms look to raise funds here.

Two top HSBC executives based in Vietnam were upbeat about bilateral business links during a visit to Singapore last week to meet investors. HSBC is one of the largest foreign banks in the country.

Mr Winfield Wong, HSBC's country head of wholesale banking, said that interest in the nation of 95 million by Singapore firms is now much stronger than last year.

Their enthusiasm has been sparked as Vietnam emerges as one of Asia's star economic performers - set to clock economic growth above 6 per cent this year, he said.

Other encouraging factors for investors this year include less volatile foreign exchange rates, as well as more conducive interest rates in the former French colony.

Singapore is the third-largest source of foreign direct investment to Vietnam, but Mr Pham Hong Hai, chief executive of HSBC Vietnam, believes the connections could deepen through Vietnamese companies listing here.

"The traditional channel is bank financing, but some are starting to look at bond issues and going overseas. Singapore would be a great market for listing," he said.

"A lot of Vietnamese companies are excited about this... In my view, it will happen, it's just a matter of time. It might be quite time-consuming to be listed here, but it will open a new market to new funding."

Vietnam's privatisation drive has accelerated this year, with stakes in the country's biggest dairy firm Vinamilk and budget carrier VietJet Air up for sale for a combined US$1 billion (S$1.42 billion).

The only downer in Vietnam's glittering growth story, it seems, is the apparently doomed Trans-Pacific Partnership (TPP). United States president-elect Donald Trump has indicated he will pull out of the deal once he takes office, though hopes remain that the TPP might take some other form down the road.

Vietnam had been regarded as one of the chief potential beneficiaries of the TPP, as it is a major textile exporter.

Mr Pham acknowledged Vietnam may not get to reap the full benefits of the TPP, which had been expected to boost Vietnamese exports by 30 per cent and expand economic growth by 10 per cent by 2030.

But he said the country still has momentum and a good growth story. "If TPP doesn't work out, Vietnam will find a way to start a bilateral trade agreement with the United States, and it will leverage on the free trade agreements signed so far. That remains a key strategy and key focus for the country going forward."

Mr Wong said that more Singapore investors will likely invest in hospitality "because that resonates well with the Vietnamese and has a high rate of success".

He said there was also a trend in Vietnam of tech companies like Samsung and Bosch investing in research and development, using Vietnam's abundant engineers.

With some recent environmental incidents in Vietnam, the government has become focused on attracting quality foreign direct investment, which plays to the strength of Singapore investors.

Mr Pham said: "Singaporean investors are viewed as good-quality investors, who have long-term commitment, and they care about the environment and society. That will play as a long-term benefit for Singaporean investment in the future."

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A version of this article appeared in the print edition of The Straits Times on November 24, 2016, with the headline Vietnam and Singapore to strengthen business ties. Subscribe