Vietnam is an old but also a new market for Hong Kong. Indeed, the special administrative region and Vietnam have had a longstanding and mutually beneficial relationship for many years. One the one hand, Vietnam is Hong Kong’s biggest export market among the Association of Southeast Asian Nations countries and sixth-largest export market globally. Indeed exports to Vietnam amounted to US$10.2 billion in 2017. On the other hand, Hong Kong was the sixth-largest foreign investor in Vietnam with total capital of nearly US$19 billion by June this year. Hong Kong investors have long been active in the hotel, garment, and real estate industries in Vietnam.
There is potential for further cooperation based on the latest trends. Vietnam was indeed an attractive trading partner to all the world investors when it joined the World Trade Organization in 2007. As an ASEAN member and a signatory to the ASEAN Free Trade Agreement, Vietnam reduced tariff and non-tariff barriers between member states. Moreover, ASEAN has also negotiated free-trade agreements with Australia, New Zealand, the Chinese mainland, India, South Korea, and Japan. The new question is: How can Hong Kong stand out from other foreign investors and play a more significant role in Vietnam?
Let’s have a look at the current investment situation in Vietnam. Foreign direct investment in Vietnam averaged US$6.10 billion from 1991 until 2018, reaching an all-time high of US$17.50 billion in December 2017. From January to August 2018, the manufacturing and processing sector received the most pledged foreign funds, followed by the real estate sector. It seems that Vietnam is at her golden age of development.
However, we should not ignore the challenges hidden behind the shining facade. According to a report released by Vietnam’s Ministry of Planning and Investment and the International Finance Corporation, Vietnam is facing two significant problems — a lack of skilled labor and low local supply chain integration. Due to these problems, the quality of investments in the country hasn’t improved in the last 10 years.
Vietnam can make use of Hong Kong’s strengths in various service sectors, particularly cross-border logistics, creative branding and design, information technology, and architecture and management consultancy when expanding economic activities overseas
In the past, most businesses investing in Vietnam sought to exploit its advantages; this explains why foreign investors mostly favor the manufacturing, processing and real estate sectors. Hong Kong enterprises in the future can explore ways to not only exploit Vietnam’s advantages to their benefit, but also create benefits for and make contributions to Vietnam. This would improve the quality of foreign investments. The work can be explored in two aspects.
The first aspect concerns the internal development of Vietnam. As Vietnam’s economy is developing so quickly, foreign investment continues to flow into the country. Thus demand for freight transport and logistics services is set to increase further. The Vietnamese government is determined to improve the country’s infrastructure such as highways, bridges, seaports, airports and terminals. Hong Kong enterprises, with professional knowledge and experience, can play a vital role by participating in the construction and management of highway networks and subway projects.
Moreover, as the Belt and Road Initiative advances, more and more opportunities are emerging for Hong Kong to boost commercial and economic cooperation with ASEAN countries. Hong Kong, thanks to its free port with no general tariffs on imported goods, has long been significant for trade between the Chinese mainland and ASEAN countries. With the signing of the ASEAN-Hong Kong, China Free Trade Agreement, lower trade barriers are expected to facilitate Hong Kong-based companies to develop service businesses in ASEAN countries. The agreement is expected to help attract more international companies to use Hong Kong as a platform to enter ASEAN markets like Vietnam.
The second aspect concerns the external expansion of Vietnam’s economy. As a growing economy, Vietnam also wants to tap into as many overseas markets as possible and expand its businesses overseas. Vietnamese enterprises can leverage Hong Kong’s advantages to expand their operations globally. Vietnam can make use of Hong Kong’s strengths in various service sectors, particularly cross-border logistics, creative branding and design, information technology, and architecture and management consultancy when expanding economic activities overseas.
As Leo Burnett, founder of the global advertising agency, put it: “What helps people, helps business.”
In seeking closer ties with Vietnam, Hong Kong should focus more on how to help Vietnam achieve its goals and create advantages for her partner. And Hong Kong enterprises’ successful experience in Vietnam can be a good reference for future cooperation with other ASEAN countries.
The author is research officer at the One Country Two Systems Research Institute, Hong Kong.
HONG KONG NEWS