Vietnam has rapidly become one of ASEAN’s most attractive host countries for Foreign Direct Investment (FDI), but the era of measuring success by volume of investment alone is coming to an end. The real challenge for the country is improving the quality of foreign direct investment to foster sustainable, long-term growth. The goal of attracting […]
Despite the ups and downs of Vietnam’s economy over the past 10 years, FDI inflows remained stable with the cumulative total registered FDI reached the level of approximately US$318.72 billion by the end of 2017.
FDI into Vietnam in the 3 years, from 2015 until 2017 has continuously increased as compared to the period of 2010 until 2013. Most of the capital inflow was deployed into projects. No surprise to us, that FDI between Vietnam and Singapore is growing significantly until today.
However, Vietnam - Singapore cooperation is complementary to each other. In addition, Vietnam is acknowledged as high technology and it identifies for attracting Singaporean investment in the near future.
In this article, you will be provided the information about FDI between Vietnam and Singapore in the past 10 years, from 2009 until 2019. You can also see Viettonkin Consulting Market Readiness Assistance to help you asses your FDI initiative here. Let’s keep reading!
Understanding FDI Between Both Countries In The Past 10 Years
Vietnam’s strong and stable growth performance over the past decade has been an attractive magnet for foreign investors, especially from Singapore. Their market share accounted for 73.9% of total FDI of all industries, including manufacturing, wholesale & retail trade, and real estate.
As more than 10 years ago, FDI inflows were focused on the high-end residential segment. The leading names in the market, such as Keppel Land, CapitaLand with the first high-end real estate projects in Vietnam, such as The Estella or The Vista. The total supply of high-end apartments in Ho Chi Minh City as of 4Q 2007 was approximately 1.700 units, and about 1.000 units were from FDI projects.
Furthermore, the Vietnamese government also prioritizes advanced technology projects of the trend 4.0 revolution, projects with modern management, and the connection between production chains and global supply.
Besides, Singapore has invested in Vietnam largely in the manufacturing sector, and Singaporean investors invest in the country in two business types, Wholly Foreign Owned Companies and Joint Venture Enterprises.
From 2015 to 2018, FDI outflows of Singapore to Vietnam by sectors were in a good shape. The accumulation of three main sectors was manufacturing with 30.118 million USD, while wholesale & retail trade was 5.153 million USD, and lastly, real estate activities were 4.656 million USD.
Moreover, the annual growth rate within the year of 2015 to 2018 in the financial and insurance services sector was 27.8%, meanwhile, the construction sector was 27.2%, and the real estate sector was 24.5%.
Speaking of the real estate sector, in the year of 2018 was also marked as a 10-year period since the downturn of the real estate market, and followed by 5 years of market recovery. Given the monetary policies are expected to stay neutral in order to support growth, when FDI inflows in the hundred millions of dollars. It was expected to enter the real estate market in Vietnam, and hoping to continue stabilizing and growing.
With the recovery of the real estate market, Singaporean investors are pouring their capital into Vietnamese real estate. This is proven by the range of large-scale property projects from the likes of CapitaLand, Keppel Land, City Development, GuocoLand, Mapletree, Kusto Home, Sembcorp, and Ascendas.
Then in 2019, Vietnam’s FDI in the manufacturing sector amounted to 24.560 million USD, and for the real estate activities was 3.880 million USD. Furthermore, the compound annual growth rate from 2014 to 2018, for the administrative and support service activities was 117.9%, while the electricity, gas, steam and air conditioning supply was 68%, and the last information and communication was 67.1%.
The Upcoming FDI Projects for Both Countries
Singapore is still becoming the largest investor in Vietnam, which is accounting for 58% of total newly-licensed FDI in the first 5 months of 2020.
In 2020, The Politburo of Vietnam issued Resolution No. 50-NQ / TW on the orientation to attract FDI in the future and also paying special attention to attract FDI projects that consisted of advanced and high technology.
According to Mr. Sagara Hirohide, the director of Marubeni Vietnam Company in Hanoi, Vietnam’s location in the long coastline and seaport system, is making the country to play a huge role in the international oversea shipping system.
Besides, Vietnam has another sector which is consumer and e-commerce that is quite attractive to foreign investors, and it also can raise the purchasing power of the local middle class.
As Vietnam’s consumer sector is maturing, Singapore’s food service and lifestyle brands can tap into this market by providing more options and customized experiences.
According to Kim from Enterprise Singapore, the Vietnamese government is taking action to build a number of supporting policies in order to create conditions for innovation and unblock the financial resources for these activities.
Hence, Singapore sees these opportunities for their technology companies and startups to tap into the vibrant ecosystem, and the country can find partners, co-innovate and offer solutions through action.
Despite the real estate, education, manufacturing, and healthcare sectors, there are other sectors, including renewable energy, the consumer sector, and infrastructure that are now playing a big role for Singaporean firms in the Vietnamese market.
Back in 2006, Singapore-Vietnam Connectivity Framework Agreement launched six sectors of cooperation. These are education and training, finance, information technology and telecommunications, investment, trade and services, and transportation.
Today, Singaporean investors are targeting the sectors which involve the fast-growing middle class of Vietnam, and these are lifestyle and consumer sector, plus F&B and retail sector. It strengthens the fact that Vietnamese consumer is increasing and vibrant, and followed by the development of numerous new malls.
As Vietnam continues digitizing, more online shoppers may be expected, and Singapore companies may collaborate with local partners, as well as offer related services, such as e-payment solutions.
With this rapid development, demand for education and vocational is also set to grow. Co-working space is also taking the potential industry because Vietnam is acknowledged as a fast-growing startup ecosystem.
In conclusion, these sectors will definitely be growing stronger, and it may be followed by new sectors in the future. The FDI projects between Vietnam and Singapore will be expected to rise, and the Vietnam’s economy has enjoyed significant growth as well.
