Cross-border ties, Australian-style

Vietnam and its people have a respected presence in Australia. Vietnamese migrants have long been accepted as an integral part of the community.

Ranjit Thambyrajah, chairman of cross-border funding and investment arranger Acuity Funding

Since official diplomatic relations were established in February 1973 the bonds between Vietnamese and Australian people have been strengthened through long-term migration, cross-cultural education, tourism, trade and investment.

Almost 300,000 people of Vietnamese ancestry live in Australia. Vietnamese is the fifth most spoken language. Vietnam is a favourite destination for Australian tourists. Many Australians live in Vietnam to assist with developing the trade and investment relationship.

The Australia-Vietnam Enhanced Economic Engagement Strategy was announced in December 2021 and it concludes that the bilateral relationship between Vietnam and Australia is strong. Vietnam and Australia established a comprehensive partnership in 2009, which was elevated to a strategic partnership in 2018. There is a commitment to deepen the bilateral investment relationship and pursue more open trade and investment.

The goal is for the two countries to become top-10 trading partners and double two-way investment.

The stage is set for investors to capitalise on this excellent relationship to expand cross-border investment, rebuild after the pandemic and fortify our nations’ economies against future threats.

Economic growth in the Indo-Pacific region has re-shaped the global landscape. Vietnam finds itself at the centre of the vibrant and burgeoning ASEAN region.

Asia boasts 60 per cent of the world’s population, 45 per cent of global GDP. Vietnam’s economy grew by an average of 6.2 per cent per year over the past decade.

Vietnam and Australia have enjoyed healthy bilateral trade for the past 20 years, growing on average by 8.6 per cent per annum, faster than Australia’s overall trade and trade with other ASEAN countries.

Bilateral investment has room to grow further. Total two-way investment amounted to AU$2.17 billion ($1.5 billion) in December 2020. The Vietnamese and Australian governments wish to double that.

Sovereign governments do not favour printing money or taking on debt to pay for major projects including roads, bridges or schools, hospitals, universities – so opportunities for private investment include nation-building projects. The governments of Vietnam and Australia have set the stage, with their Enhanced Economic Engagement Strategy, for private investors, hedge funds and other forms of private equity to flow into Vietnam and vice versa.

Scenario one: Cross-border investment into Australia

Vietnam’s investment in Australia increased five times between 2008 and 2020, from AU$155 million ($107.13 million) to AU$785 million ($542.6 million). In 2019, Vietnamese invested more in Australia than in any other country.

The Australian economy has had unprecedented growth since the early 1990s surviving the global financial crisis in better shape than most economies. Growth was interrupted only by the recent pandemic. Strong demand for resources and agricultural produce from rapidly growing economies including Vietnam has underpinned Australia’s economic prosperity.

Demand from Southeast Asia for Australia’s education, tourism and other professional services has also driven growth. Australia is the 13th largest economy in the world, with an annual GDP of almost $1.4 trillion. The World Economic Forum’s Global Competitiveness Index for 2019 ranked Australia at 16, and the Ease of Doing Business Index for 2020 ranked Australia at 14.

Australia offers investment opportunities in resources and energy, circular economy, defence, advanced manufacturing and space, digital technologies, agribusiness and food, health, and infrastructure.

Australia’s is a stable investment environment, a gateway to the Asia-Pacific, providing investors with access to a growing consumer market. Its skilled workforce can support the growth of businesses across a range of industries. Investment opportunities abound due to Australia’s rich supply of natural resources.

There are synergies between Vietnam’s strengths in electronics and technology and Australia’s emerging expertise in advanced technologies and AI in finance, education, medicine and food production. Cultural similarities help Vietnamese investors pursuing Australian opportunities. The large Vietnamese-Australian community makes it easier to navigate the cultural and business landscape.

Acuity Funding helps Australians expand into Vietnam with knowledge and relationship-building

Challenges

Acuity Funding has observed earlier waves of cross-border investment from Japan and China into Australia’s property market. They were undermined by a lack of local knowledge and the inability to secure funding to complete projects.

During the 1980s there was rapid growth of foreign direct investment (FDI) out of Japan, driven by the liberalisation of Japan’s financial markets and rapid appreciation of the yen. This coincided with the deregulation of Australia’s markets. Expansion of Japanese inbound tourism resulted in investment in tourism infrastructure, including luxury hotels.

The reversal of Japan’s economic fortunes in the 1990s saw most Japanese investors withdraw from Australian projects rapidly. Whilst their 1980s investments resulted in substantial hikes in property values, particularly in areas such as Queensland’s Gold Coast, their rapid withdrawal saw substantial price reductions.

Chinese investors followed in the early 2000s, purchasing land to develop mixed-use buildings in capital cities to sell only to Chinese clients. The 2008 global financial crisis meant many of those property investments were riskier than they looked. Chinese buyers did not eventuate. A lack of cashflow resulted in some projects being abandoned. The inability of Chinese investors to secure local funds was the cause of failure.

Whilst these missteps by earlier cross-border investors are clear, Australia can do more to pave the way for Vietnamese investors.

Simplifying visa application processes and increasing the availability of visa options for business and investment purposes is needed.

Additional refinements in cultural understanding through cultural exchanges, language classes and other activities would also help. Tax incentives to Vietnamese investors, business development programmes and other initiatives to help Vietnamese businesses get established could compound successes.

The solution

Cross-border investment can be done with ease by using a funding arranger who understands both markets and cultural nuances. Acuity brings expertise as a fund arranger and project manager with excellent industry knowledge and connections to provide immigration assistance and education opportunities.

Acuity is the only funding arranger in Australia offering services across infrastructure and government project funding, public-private partnerships, specialised securities and international mortgage management. We arrange large-scale funding for major projects in infrastructure, mining, agriculture, technology, or real estate. Over 40 years of experience give our services wisdom and innovation that first-time cross-border investors need.

We have a record of helping developers and businesses break into markets. Our understanding of the regulatory and financial expectations Australian governments have of their commercial partners is extensive.

Scenario two: cross-border investment into Vietnam

As of December 2020, Australia’s investment in Vietnam totalled AU$1.38 billion ($953.8 million) or 0.51 per cent of total registered investment in Vietnam. Australia was ranked 20th out of all countries investing. This low base represents an opportunity.

Vietnam’s economy attracts strong domestic and foreign investment flows. It is a great place to invest, offering rapid industrialisation and proximity to other growing economies. Vietnam’s international rankings as a preferred investment destination have improved substantially in recent years. Vietnam was ranked 19 globally as a destination for FDI in 2020, jumping five places from 2019.

Vietnam’s Global Competitiveness Index ranking jumped 10 spots to 67 (the largest jump of any economy) in 2019. Vietnam also rose 12 places from 82 in 2016 to 70 in 2020 on the global Ease of Doing Business Index. Ratios of FDI inflows to GDP are among the highest in Southeast Asia. Opportunities prevail in construction, food and beverages, financial services, steelmaking and airport expansion.

Challenges

The business culture in Vietnam is relationship oriented. Trust is the key to developing lasting investment relationships. The cultural nuances and expectations of Vietnam’s government and private sector mean that it may be worth engaging expert help. The other challenge is securing funding for large projects.

The solution

Acuity Funding’s global desk means we can provide Australians expanding into Vietnam with the knowledge and relationships for success. Its membership of SWIFT gives us the global capacity to engage in payments, securities, banking, and investment services. Our reputation for financing major projects with no funding cap provides investors and clients with confidence.

In addition to meeting with the Australian Ambassador to Vietnam, Andrew Goledzinowski, Acuity has established working experience with the State Bank of Vietnam and other leaders of the government and banks.

In Vietnam, the delivery of major projects, including energy and infrastructure, is dependent on external funding. That is a great opportunity for Acuity’s investors who are looking for growth opportunities as they wait out the cost-of-living crisis slowing down western economies.

Our mission is to connect investors with those needing funds by providing the highest levels of transparency, local representation, transaction speed and efficiency. We can confirm funds, receive funds, and administer the movement of funds seamlessly between our growing client base of investors, borrowers, and others.

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