Vietnam makes safe-haven pitch amid US-China trade conflict

An e-scooter assembly line in a factory in Hai Phong. With Vietnam having a raft of free trade agreements, relatively cheap labour and close proximity to China, Prime Minister Nguyen Xuan Phuc has a good story to tell the global executives he will me
An e-scooter assembly line in a factory in Hai Phong. With Vietnam having a raft of free trade agreements, relatively cheap labour and close proximity to China, Prime Minister Nguyen Xuan Phuc has a good story to tell the global executives he will meet at the World Economic Forum in Davos, Switzerland, this week.PHOTO: REUTERS

HANOI • A red-hot economy, business-friendly policies and a Communist Party led by free-traders - this is the elevator pitch Vietnamese Prime Minister Nguyen Xuan Phuc is delivering to global investors amid the trade war between the United States and China.

"We are ready to grab the opportunity," Mr Phuc said in an interview with Bloomberg TV, a few days before departing this week for the World Economic Forum in Davos, Switzerland.

Vietnam is quietly positioning itself as a safe haven for manufacturers wary of getting caught in the crossfire of the tariff war between the US and China.

With Vietnam having a raft of free trade agreements, relatively cheap labour and close proximity to China, Mr Phuc has a good story to tell the global executives he will meet in Davos.

"We are trying to increase exports, in both quantity and quality... especially in those which we have advantages, such as seafood, commodities, footwear and electronics," he said. "We aim to become an export economy that can grow fast and provide more jobs with higher income for our people."

Nonetheless, the South-east Asian nation is yet to see a flood of companies moving in from China, he said.

Its economy also has some serious challenges to overcome - inadequate infrastructure and a lack of skilled workers make it difficult to attract manufacturing beyond assembly-line work such as garment stitching.

 
 
 

The US-China trade war and more subdued world growth is weighing on export demand, a threat to an economy such as Vietnam where trade accounts for about twice the nation's gross domestic product. About a quarter of Vietnam's total trade is with China.

Vietnam's economy seems to be sheltered for now. Growth quickened to 7.1 per cent last year, among the fastest in the world.

Mr Phuc said he is confident that growth will reach the higher end of the government's forecast range of 6.6 per cent to 6.8 per cent this year. He also vowed to keep the Vietnamese dong stable this year.

Vietnam, which has completed about 16 free trade agreements, began tethering itself to global trade after introducing market-oriented "doi moi" reforms in the 1980s.

Exports surged to a record US$244 billion (S$331 billion) last year, with US customers accounting for about US$48 billion of that - more than double compared with five years ago.

Vietnam has also cropped up in the swirl of rumours and conjecture as a possible site for the much-anticipated second summit between US President Donald Trump and North Korean leader Kim Jong Un.

While no decision has been made on the location, a Vietnamese government source said "logistical preparations" for hosting a summit were under way, most likely in the capital Hanoi or coastal city of Danang.

A version of this article appeared in the print edition of The Straits Times on January 21, 2019, with the headline 'Vietnam makes safe-haven pitch amid US-China trade conflict'. Print Edition | Subscribe