SINGAPORE, March 9 (UPI) -- Singapore is already Vietnam's leading foreign investor with projects in all economic areas. Now, more companies are looking to take advantage of the second fastest growing economy in Asia after China, while the two countries' governments work on closer economic cooperation.
To date, Singapore has around 290 projects with total committed investments of US$7.8 billion, including many projects by Singapore-based transnational companies. Overall, there are more than 4,400 foreign investment projects in Vietnam worth nearly $41 billion, says Nguyen Bich Dat, vice minister for planning and investment in Vietnam.
Such foreign investments have been key to the development of the country, which still remains far behind the rest of the region in terms of development and industrialization.
Since the new economic policy of "Doi Moi," Vietnam has introduced a series of market reform policies including the recent Enterprise Law. Investment procedures have been simplified and since the start of this year, domestic and foreign companies are now subject to the same tax laws.
Meanwhile, the country has enjoyed strong GDP growth, up an average 7.2 percent over the last 10 years. For the next two years, the government is projecting an annual growth rate of 8 percent.
As a result, the foreign invested sector is now responsible for 20 percent of the total national investment capital, 31 percent of Vietnam's export earnings, 34 percent of total industrial production value and 14.3 percent of gross domestic product.
"Interest in the Vietnamese market is clearly rising in tandem with its high growth," notes Lee Yi Shyan, chief executive office of IE Singapore (the Singapore trade development board).
While Singaporean investments have touched all sectors of the economy, from oil and gas exploration to industrial manufacturing and agricultural product processing, they have tended to focus on the service sector, particularly in property and development of industrial zone infrastructure, hotels and offices for lease.
The Vietnam-Singapore Industrial Park -- which is located 17 kilometers south of Ho Chi Ming City and is one of the largest Singapore investments in Vietnam -- is currently embarking on the third phase of its expansion plans which could create some 10,000 new jobs, while property group Keppel Land is considering developing two projects.
But one interesting investment development has been the two country's efforts to encourage joint-investment opportunities for third party investors, taking advantage of their economic complementariness.
Late last year, they agreed to set up an initiative to promote third country investments into both of them by providing fast track approvals and investment facilitation for such projects. It is hoped that under the co-operation, investors will be able to take advantage of the combined strengths of both countries by locating activities according to the respective strengths of each country.
"If we can do this well, Singapore and Vietnam together can present a very attractive value proposition to investors compared to other locations in the world," George Yeo, Singapore minister for trade and industry told investors at a business forum Tuesday.
While Vietnam has an abundant and low-cost labor force, land and resources, Singapore has experience in marketing, distribution, research & development and management activities.
Since the initiative was started, some initial projects have been selected, although Vietnamese Prime Minister Phan Van Khai admits that the results remain limited. "I believe that this new form of cooperation will meet the need of both countries and therefore should be promoted on a long-term basis," Khai said.
Still, some companies are taking the plunge. On Tuesday, Zentek, a Japanese technology company, announced it will be collaborating with Singapore mobile handset design company iWoW and Vietnam handset manufacturer Vina-Mobi to make mobile phones for Indochina. The plant is expected to produce more than one million mobile phones annually by the third year. There are currently three GSM cellular network operators in Vietnam serving a population of 82 million, but the mobile penetration rate is only about 3 percent.
With this investment, Zentek will be able to tap on both Singapore's technological capabilities and Vietnam's lower labor costs to manufacture high-quality products at competitive prices, pointed Yeo. "This is but one example of how the complementary strengths of Singapore and Vietnam when combined can benefit both our economies," he said.
A second company, Singapore-based Japanese firm Giken Sakata, which makes precision microshafts and mechanical modules, is also planning to enhance its technical developments in Singapore to manufacture in Vietnam. It plans to set up one manufacturing plant each in northern and southern Vietnam, which will generate nearly 3,000 jobs.
Singaporean companies are not the only ones finding Vietnam interesting at the moment. According to a recent survey conducted by the Japan Bank for International Cooperation (JBIC), the Japanese business community has ranked Vietnam just behind China, the United States and Thailand as far as investment attractiveness and prospects are concerned.
