APEC week boosts Vietnam’s appeal

Vietnam’s hosting of the APEC Economic Leaders’ Week and its economic reforms encourage global investors

The president and chief executive officer of US-backed Overseas Private Investment Corporation, Ray W. Washburne, felt happy when he travelled to Vietnam last week – at the same time as US President Donald Trump’s state visit to the country – and attended the APEC Economic Leaders’ Meeting and the APEC CEO Summit organised in the central city of Danang.

In Vietnam, together with CEOs of about 30 more leading US firms, Washburne met with Vietnamese leaders and partners to talk about Overseas Private Investment Corporation’s (OPIC) business plans in Vietnam, where the institution will officially provide long-term loans for American investors who have their sights set on the country.

“Vietnam has changed so much, with the economy surging to become an attractive destination for foreign investors,” Washburne said. “This will offer opportunities to OPIC.”

It is expected that OPIC will offer direct loans and guarantees of up to $250 million for tenors as long as 20 years.

As the US government’s development finance institution, OPIC supports American businesses investing in emerging markets to address critical development challenges, from access to clean water and electricity to housing, education, and access to finance.

Currently, OPIC is planning to work with several partners to deploy its services in Vietnam. It is expected that OPIC’s loans for US investments in Vietnam will be about $500 million over the next two years, and the figure is expected to rise to about $2 billion within the next ten years.

OPIC will prioritise many types of projects in Vietnam, with a focus placed on the sectors of renewable energy, IT, construction of smart cities, agriculture, healthcare, and education and training.

Billion-dollar investments

During the APEC Economic Leaders’ Meeting and President Trump’s visit to Vietnam, co-operation deals worth a total of about $3 billion were inked between Vietnamese and American firms, including a $1.2 billion deal on auto manufacturing, and a $120 million deal on aircraft equipment.

“In the early 1990s, nearly half of Vietnam survived on just a few dollars a day, and one in four did not have any electricity. Today, an opening Vietnamese economy is one of the fastest-growing economies on earth. It has already increased more than 30 times over, and the Vietnamese students rank among the best students in the world. And that is very impressive,” US President Donald Trump stated at the APEC CEO Summit.

“This is the same story of incredible transformation that we have seen across the region,” he said.

According to Dang Thanh Tam, chairman of the Saigon Invest Group and Kinh Bac City Development Holding Corporation (KBC), APEC 2017 is a huge opportunity for the whole country to attract a new wave of investments from more than 2,000 international groups in APEC.

“We have met with many global CEOs here to discuss business and investment co-operation plans in Japan and the US,” said Tam, who is also a member of the APEC Business Advisory Council.

Up until now, KBC, a Vietnamese group with 20 industrial parks nationwide, has helped Vietnam attract about $2 billion annually, accounting for over 10 per cent of the country’s total attracted foreign direct investment (FDI).

“Normally, when a Vietnamese delegation goes abroad for investment promotion, it can meet only one or two CEOs of big foreign firms, and this costs much time and money for travelling and procedures. However, at the APEC Vietnam 2017, we can directly meet with them ‘free of charge’, meeting global CEOs from firms like Facebook, Cargill, Apple, Abbott, AIA, Walmart International, and ExxonMobil,” Tam told VIR.

“They have directly witnessed how much Vietnam’s business and investment climate has changed over the past few years, and how attractive the country has become to them,” he added.

Last week, Prime Minister Nguyen Xuan Phuc met with several global CEOs who attended the APEC events and said that their groups wished to continue investing in Vietnam.

For example, Abbott’s CEO Miles D. White said that Abbott’s subordinate companies are keen on expanding operations in Vietnam and committed to assisting the country in building an open and friendly business environment via policymaking consultation.

Phuc called on Abbott to transfer technologies used in medicine and pharmaceuticals to Vietnam and encouraged its collaboration in food safety, adding that the government’s administrative reform consulting group will acquire Abbott’s feedback to reform administrative procedures in food safety and public healthcare.

Meanwhile, president of ExxonMobil Development Liam Mallon, told the Vietnam Business Summit that ExxonMobil’s multi-billion dollar Blue Whale gas deal with Vietnam is on track for a final agreement by 2019. “We are actively involved in trying to progress the largest offshore gas investment ever made in Vietnam.”

The Blue Whale – or Ca Voi Xanh – gas field has an estimated 150 billion cubic metres of reserves and is scheduled to start production in 2023.

Gas will be extracted from a depth of 1,500 metres below the seabed, transported onshore through an 88km pipeline to power four power plants to be built in Vietnam’s central province of Quang Nam.

Mallon praised Vietnam for its successes in attracting more and more foreign investors and wishes to do long-term business in the country.

Chang Bok Sang, president and CEO of CJ Group Vietnam, told VIR that his firm will continue expanding its operations in Vietnam in many sectors, including foodstuff.

“Despite our presence in the Vietnamese market for over 20 years, CJ still thinks that Vietnamese companies understand Vietnamese consumers and markets the best. We find the best way to connect with Vietnamese consumers and the local market is in long-term investment. Mergers and acquisitions (M&A) are a way to reach it. That is why CJ always wants to co-operate with potential Vietnamese partners to do business together,” Chang said.

“For example, collaborating with Cau Tre and Minh Dat through M&As, CJ has made an investment in Hiep Phuoc Industrial Park to build a food complex, which includes a food processor factory, a food research and development centre, and a food safety centre. CJ’s starting point is frozen foods, but we will branch into dry foods as well as other various types of food, as well,” he said.

In another case, Damian Kassabgi, director of Public Policy for Asia Pacific at US ride-sharing giant Uber Technologies, Inc., has come to Vietnam with a plan to expand the firm’s local operations.

Uber provides a smartphone application that connects drivers with people who need a ride.

“Uber has been operating in Vietnam for only three years, but its revenue growth has hit double digits, and we are expecting a growth rate of triple digits in the very near future,” said Kassabgi.

“We are seeing very fast growth in Vietnam, with huge demand for our services. We currently have two offices in Hanoi and Ho Chi Minh City, but will soon expand operations in many other localities,” Kassabgi said. “We see millions of people using our product to travel.”

Cargill Vietnam is also expanding operations in Vietnam. In December, Cargill will put into operation a $10 million warehousing facility in Phu My port in the southern province of Ba Ria-Vung Tau. The firm is also interested in further talks with the Ministry of Transport about the development of a northern port, to explore how the company can apply its existing and future capabilities to the different facilities in the country’s northern region.

“Vietnam is a critical aquaculture market for Cargill. Cargill continues to be an active investor in Vietnam by further expanding our workforce, manufacturing capabilities, distribution network, and product line diversification,” Jorge Becerra, managing director of Cargill Feed and Nutrition Vietnam, told VIR.

Global chairman of PwC Robert E. Moritz also confirmed that his firm will assist Vietnam in improving its business climate, helping the country become more attractive to foreign investors.

According to the Ministry of Planning and Investment, as of October 20, firms from 18 APEC economies invested in over 20,300 projects in Vietnam, registered at over $247 billion – making up nearly 78.9 per cent of the country’s total attracted FDI of nearly $313 billion.

PM Nguyen Xuan Phuc met with Liam Mallon, president of ExxonMobil Development

Better business climate

At the Vietnam Business Summit as part of the 2017 APEC Economic Leaders’ Week, Victoria Kwakwa, the World Bank’s vice president for the East Asia and Pacific Region, said that Vietnam’s business environment has significantly improved, with the institution raising the country’s business climate index by 14 ranks – a record improvement over recent years.

The organisation recently issued its high-profile “Doing Business 2018” report, which stated that Vietnam has “implemented the most reforms in the past 15 years, numberin 39. Today, an entrepreneur in Ho Chi Minh City spends 22 days and 6.5 per cent income per capita registering a new company, compared to 61 days and 31.9 per cent in 2003.”

Under the report, Vietnam’s business climate index rose to the 68th position out of 190 economies surveyed, from 82nd out of 190 economies surveyed last year.

The World Economic Forum’s (WEF) executive director Philipp Roesler also said that Vietnam “has made impressive progress in improving its national competitiveness, which, under WEF’s Global Competitiveness Index 2017-2018 released in September, has climbed by five ranks in 2017 against 2016 – from the 60th out of 138 economies surveyed last year to the 55th out of 137 economies surveyed this year. Many indexes have significantly improved, imcluding technology and market size.

“Here at the APEC event, I would say that Vietnam is an ideal business and investment location for all of you,” he told businesspeople at the summit. “That’s because Vietnam is making spectacular progress in its market development.

“Compared to five years ago, Vietnam has climbed by 20 ranks. This means that Vietnam is making great progress in creating a more business-friendly climate.”

Last week, PwC released its “2017 APEC CEO Survey: ASEAN Report”.

“Confidence levels are high among business leaders in Vietnam. This is not surprising. Close to half of foreign business investors in Vietnam (47 per cent) plan to increase their investments in Vietnam over the next 12 months,” said PwC Vietnam general director Dinh Thi Quynh Van.

“Positive development can be seen in three areas: an expanding domestic economy, expectations of new growth from trade agreements and export expansion (both regional and intra-regional export growth), along with a positive outlook on innovation in key sectors of opportunity. Sustained economic reform, coupled with a strengthening of public institutions and an emphasis on education and skills development will be crucial to make Vietnam fit for the future,” Van said.

This autumn, PwC published three reports that analysed prospects for business growth in Vietnam in different ways. The firm affirmed in these reports that prospects for revenue growth in 2018 are strong. Some 92 per cent of CEOs in Vietnam are confident in growth for their business over the next 12 months, with 38 per cent being “very confident”.

A net 62 per cent of CEOs in Vietnam will increase investments in 2018, higher than the APEC average of 50 per cent.

About 47 per cent of foreign investors in Vietnam plan to increase their investment in the country over the next 12 months. Vietnam is among the top four economies in this regard, the others being China, Indonesia, and the US, where at least 40 per cent of foreign CEOs plan to raise spending.

According to AmCham Singapore, 56 per cent of US firms surveyed consider Vietnam the best trade partner.

“Vietnam is now making great efforts to perfect itself in order to continue being a reliable and promising business partner of the international business community,” stated Prime Minister Nguyen Xuan Phuc at last week’s Vietnam Business Summit.

“It is expected that the rate will be 6.7 per cent this year, and 6.5-6.7 per cent for the 2016-2020 period,” Phuc said, adding that Vietnam has inked 12 bilateral and multilateral free trade agreements (FTAs) and is now negotiating another four new-generation FTAs, including some with APEC economies.

He said that 10 years after joining the World Trade Organization, Vietnam’s export-import turnover has increased four-fold to more than $400 billion, equivalent to 170 per cent of GDP.

“We have significantly improved our investment and business climate. Vietnam has attracted more than 24,200 FDI projects from 120 countries and territories, registered at over $310 billion, equivalent to 155 per cent of GDP,” Phuc said. “FDI from APEC economies into Vietnam has hit nearly $250 billion, equal to about 80 per cent of Vietnam’s attracted FDI over the past three decades. Many leading groups of APEC economies have selected Vietnam to develop their regional production base, which is connected to the global value chain.

“Furthermore, Vietnam has about 52 million internet users, or 54 per cent of the population, and 55 per cent of the population use smartphones. It is forecast that by 2020, Vietnam will be home to the largest population of smartphone users in the region.

“This will offer big opportunities to potential investors working on ways to connect their products and services to Vietnam’s customers,” the prime minister stressed.

Strong commitments

Phuc also affirmed that efforts are being made to build a more enabling government in favour of people, enterprises, and investors. In addition, he also announced a number of new priorities for the government in the near future.

Vietnam will focus on developing the healthcare and educational systems, bridging the income gap, and improving the social security network aiming to protect vulnerable citizens from negative impacts, he stated.

The country will also develop the startup scene and innovative economy by supporting and creating favourable conditions to foster and realise startup initiatives, Phuc said, calling for the engagement of investors in the process as well as the establishment of more startup support funds and venture capital funds in Vietnam.

Furthermore, Vietnam will also reform its tax policies, oriented toward improving the economy’s competitiveness and increasing transparency, equality, and efficiency, in line with the high standards set by the Organization for Economic Co-operation and Development, he stressed.

“Currently, the average corporate income tax in Vietnam is 20 per cent, and this rate will be reduced to 15-17 per cent under a new roadmap. Additionally, Vietnam is also offering many incentives to investors in sectors such as high-tech, supporting industries, and high-tech agriculture,” the prime minister said.

According to OPIC’s Ray W. Washburne, Vietnam’s business and investment climate has significantly improved, which will help the country attract more FDI.

“With a stable political climate and a large population, Vietnam is moving up on the global value chain thanks to a government strongly committed to reforming the country’s investment climate,” he said.

OPIC currently manages a $20 billion portfolio of projects in 162 nations. OPIC also provides loans for US firms and investors in Indonesia, Cambodia, Myanmar, the Philippines, and Thailand. Under OPIC’s strategic vision, Vietnam is quite a new investment market as the country has great potential for rapid growth.

In Vietnam, OPIC has so far provided a $5.4 million loan for Australis Aquaculture to create the world’s largest sustainable barramundi fish farm in Van Phong Bay in the south-central province of Khanh Hoa. The venture specialises in sustainable and eco-friendly aquaculture and employs 100 local workers.

Meanwhile, KBC’s chairman Dang Thanh Tam also said that with the government’s efforts to improve the local business and investment environment, a new wave of APEC investments will soon surge in Vietnam.

“You can see that the prime minister has met with enterprises many times this year to directly address their worries. This has strengthened their confidence,” Tam said.