Over the past five years, Singapore’s investments in Việt Nam have nearly doubled. Singapore’s Trade and Industry Minister, Lim Hng Kiang, emphasises the development of longstanding economic relations between Singapore and Việt Nam, which have yielded concrete outcomes, including creation of the Việt Nam-Singapore Industrial Parks (VSIPs). Oxford Business Group talks to Minister Lim about these economic relations.

Ten years after its implementation, how do you assess the Singapore-Việt Nam Connectivity Framework agreement?

The Connectivity Framework Agreement has helped to deepen the longstanding economic relations between Singapore and Việt Nam, and has yielded concrete outcomes, including the Việt Nam-Singapore Industrial Parks (VSIPs). Bilateral trade between Singapore and Việt Nam grew steadily over the past decade, from S$11.3 billion (US$8.1 billion) in 2006 to S$21.6 billion in 2015. Over the past five years, Singapore’s investments in Việt Nam have also grown from approximately S$24.5 billion to S$46.8 billion in 2014. Việt Nam is now Singapore’s 11th largest trading partner, while Singapore is Việt Nam’s 6th largest trading partner. Our people-to-people links have also been strengthened through the growing numbers of visitors from Singapore to Việt Nam, and vice versa. The Connectivity Framework Agreement has also enabled both sides to make good progress and exchange updates on areas of economic cooperation and ongoing initiatives, and to discuss and resolve economic or trade-related issues that arise. Singapore appreciates Việt Nam’s commitment and support on the issues that have been raised, which has helped to facilitate a more conducive environment for foreign investments into Việt Nam. Singapore and Việt Nam have held 12 Connectivity Ministerial Meetings, to date, and we look forward to Việt Nam hosting the 13th Connectivity Ministerial Meeting in 2017.

How is the Việt Nam-Singapore Industrial Park (VSIP) model being carried out at other Vietnamese localities?

The first VSIP, launched in 1996 in Bình Dương province, was based on a traditional industrial park model. It comprised a self-contained industrial park with modern facilities, such as ready-built factories and full infrastructure facilities, including electricity, treated water, sewage treatment and telecommunications. Following the success of the first VSIP, more VSIPs have been developed across Việt Nam, such as in Bắc Ninh, Hải Phòng, Quảng Ngãi, Hải Dương, and Nghê An provinces, by Sembcorp and its joint venture partner Becamex IDC Corporation. The VSIPs have contributed to Việt Nam’s growth and development by creating more than 170,000 jobs in Việt Nam and generating an estimated total investment capital of US$9 billion from 23 countries. The newer VSIPs are based on an integrated industrial township model, offering mixed-use development concepts that incorporate quality "work, live and play" elements to suit the demands of Việt Nam’s rapid urbanisation in environmentally sustainable ways. From traditional industrial parks, the VSIPs have become integrated townships attracting higher value-added industries, such as pharmaceuticals, consumer products, and precision engineering, to keep pace with Việt Nam’s aspirations to transform its economy to move up the value-chain. Today, there are seven VSIP projects across the southern, central, and northern provinces of Việt Nam. I was honoured to attend the ground-breaking ceremony of the 7th VSIP in Nghệ An in September 2015. SembCorp also commemorated the 20th anniversary of the VSIPs in September 2016, in conjunction with Deputy Prime Minister Teo Chee Hean’s visit to Việt Nam. Strong investment flows and interest from companies from a diverse range of industries have seen the VSIPs flourish and expand. The VSIPs remain a strong symbol of our bilateral economic ties, and serve as a testament to the enduring success of this signature initiative between Singapore and Việt Nam.

What reforms would enhance foreign direct investment (FDI) in Việt Nam?

Việt Nam’s economic outlook is positive. Việt Nam is also expected to see good FDI growth in the near-to-medium term, driven by a number of new Free Trade Agreements (FTAs), such as the Trans-Pacific Partnership (TPP), as well as Việt Nam’s bilateral FTAs with the Republic of Korea and the European Union.

Việt Nam has taken positive steps to improve its business environment and Singapore welcomes initiatives, such as the revision of Việt Nam’s Foreign Investment laws, allowing greater participation in state-owned sectors, and promoting infrastructure development in Việt Nam through Public-Private Partnerships (PPP), among others. These initiatives will help to address obstacles that enterprises face when operating in Việt Nam and improve the business environment for foreign investors.

Singapore businesses take a long-term view when investing abroad, and look beyond the immediate challenges to assess the potential of the market in the long-run. Our companies recognise that Việt Nam is a country with strong economic fundamentals, including a demographic advantage in its young working population, and availability of resources, such as agricultural land, minerals, oil and gas.

In what ways can Singapore companies contribute to the expansion of Việt Nam’s financial services?

Singapore is a recognised international financial hub. Over 200 banks have a presence in Singapore to service their corporate clients’ international activities. Singapore also hosts many international wealth management and insurance companies, as well as other financial institutions.

Singapore banks also have strong global networks, especially in Asia. For example, UOB has more than 500 offices in 19 countries, spread throughout Asia, Western Europe and North America. DBS and UOB have also set up in Việt Nam to service global clients who have invested in Việt Nam.

Việt Nam’s big corporations, such as PetroVietnam, Viettel Group and C.T. Group, have entered into overseas markets, such as Russia, Peru and Myanmar. Meeting the needs of corporate clients in relatively unknown markets may be challenging for Vietnamese banks. Such corporate clients will also usually require more sophisticated banking services.

Việt Nam’s banks can partner with our Singapore banks and financial institutions with a presence in these markets. Besides tapping into the Singapore banks’ market knowledge, their clients can also make use of the ready services offered by these banks in those markets. This will be a win-win situation for all parties.