In April 2024, Singapore and Vietnam celebrated 51 years of diplomatic relations, marking a strengthened partnership. With air travel taking just 1.5 hours and six new diplomatic agreements, foreign investors benefit from robust bilateral ties.
Vietnam has become the preferred destination for Singaporean firms expanding overseas. Strong diplomatic ties, strategic location, burgeoning economy, and favorable investment policies make Vietnam attractive for business growth and collaboration.
This successful partnership offers mutual benefits and fosters economic growth. As Singaporean firms venture abroad, Vietnam remains the first stop for investment, demonstrating the enduring strength of their relationship.
Investing in Vietnam? Expand Your Business from Singapore to Vietnam with InCorp Vietnam’s Services
Beyond the strong ties between Singapore and Vietnam, the latter stands as one of the fastest-growing economies globally and is the 3rd largest market in Southeast Asia. Low costs and abundant natural resources are just a few key factors attracting Singaporean investors. In this article, we will explore nine compelling reasons why Singaporean companies should invest in Vietnam.
1. Vietnam-Singapore Industrial Park (VSIP)
The close economic cooperation between Singapore and Vietnam has contributed to the establishment of ten Vietnam-Singapore Industrial Parks (VSIP) and projects operated in Binh Duong, Hai Phong, Bac Ninh, Quang Ngai, Hai Duong and Nghe An.
Over the years, these ten VSIP projects have attracted over US$3.2 billion of investments, with more than 321 projects providing jobs for more than 250,000 local workers. Industry partners that establish in these parks come from diverse sectors such as food manufacturing, chemicals, and precision engineering. Vietnam’s development strategy that focuses on improving the accessibility and quality of industrial parks is a stepping stone for Singaporean firms to venture into the Vietnamese markets.
Read More: A Guide to Launching a Manufacturing Business in Vietnam for Foreigners
2. Trade Agreement
Vietnam demonstrates its commitment to collaboration and trade with Singapore through the Singapore-Vietnam Connectivity Framework Agreement. This agreement builds on the strengths and competencies of both nations to accelerate Vietnam’s rapid economic growth and encourage active participation from Singaporean firms. By facilitating smoother trade flows and creating a conducive environment for business operations, the Connectivity Framework Agreement ensures that both countries benefit from shared growth and prosperity.
The economic partnership between the two countries is significant. Vietnam is Singapore’s 10th largest trading partner, while Singapore ranks as Vietnam’s 6th largest trading partner. This robust trade relationship is evidenced by the growth of various commodities exchanged between the two nations. Products such as grease, iron and steel, tobacco, leather, seafood, vegetables, and glass have seen significant increases in trade volumes, reflecting the dynamic nature of their economic interactions. As both nations continue to deepen their economic ties, the Singapore-Vietnam Connectivity Framework Agreement stands as a testament to their shared commitment to fostering a prosperous and collaborative future.
Read More: Bilateral Investment Between Singapore and Vietnam: Useful Key Insights
3. Growing GDP (Gross Domestic Product)
Vietnam continues to demonstrate robust economic growth, with the GDP growth rate reaching 6.93% in the second quarter of 2024. This marks a significant recovery and expansion, positioning Vietnam as one of the fastest-growing economies globally. The steady growth rate underscores the country’s stable economic environment, making it a highly attractive destination for foreign investment.
The GDP growth is driven by several key sectors:
- Manufacturing and Construction: Experiencing substantial growth, these sectors have been pivotal in sustaining the economic momentum.
- Services Sector: With a notable expansion, services now contribute significantly to the GDP, bolstered by retail and tourism.
- Agriculture, Forestry, and Fisheries: These sectors continue to provide a solid foundation for the economy, contributing to the overall growth rate.
Additionally, Vietnam’s proactive economic policies and strategic investments have played a crucial role in maintaining this growth trajectory. The government’s commitment to fostering a favorable business environment and its focus on sustainable development further enhance Vietnam’s appeal as an investment hub.
With a projected GDP growth rate between 6% to 6.5% for the entire year of 2024, Vietnam is set to continue its path of economic expansion, offering numerous opportunities for investors and businesses looking to tap into this dynamic market.
Read Related: Vietnam’s Economic Growth Projections: Surpassing Southeast Asian Nations by 2036
4. Ease of Doing Business in Vietnam
Doing business in Vietnam has climbed from 82th to 70th amongst 190 economies in the World Bank’s Ease of Doing Business ranking in 2020. One of the major factors is that Vietnam has improved the transparency and openness of regulations pertaining to foreign trade. Simplified agreements such as tax incentives and reduced electricity costs give Singaporean firms competitive benefits to enter Vietnam.
On top of that, Vietnam government is constantly making improvements to their processes and therefore the future prospects of ease of doing business in Vietnam are very assuring. Vietnam is envisioned to hike to the 60th spot of EDOB by 2020.
5. Modern Infrastructure
The comprehensive and modern infrastructure system in Vietnam, including advanced transportation and telecommunication networks, offers significant benefits to investors from Singapore in terms of cost savings, productivity, and efficiency. Vietnam has invested heavily in upgrading its infrastructure to support its rapid economic growth, ensuring that businesses can operate smoothly and effectively.
A few notable examples of this infrastructure include Tan Son Nhat International Airport and Saigon Port. Tan Son Nhat International Airport, located in Ho Chi Minh City, is the busiest airport in Vietnam, handling millions of passengers and tons of cargo annually. This airport provides excellent connectivity to major cities around the world, facilitating easy and efficient travel for business professionals and the swift movement of goods.
Saigon Port, also located in Ho Chi Minh City, is one of the largest and most important seaports in Vietnam. It plays a crucial role in international trade, offering state-of-the-art facilities for the handling and storage of cargo. The port’s strategic location and advanced logistics capabilities ensure that goods can be transported efficiently, reducing lead times and operational costs for businesses.
6. Strategic Location
Located in the heart of the ASEAN region, Vietnam serves as a crucial hub for neighboring countries. Its strategic position offers short distances to other promising markets, with China being the most notable. The country’s long coastline provides direct access to the Southern China Sea and its Southeast Asian neighbors, facilitating easy trade and transportation. Additionally, Vietnam boasts abundant labor, natural resources, and local expertise, making it an ideal location for business operations.
Ho Chi Minh City and Hanoi are two major cities where Singaporean firms often establish their businesses. These cities offer robust infrastructure, dynamic economic environments, and a welcoming business climate. By setting up operations in these urban centers, Singaporean companies can leverage Vietnam’s strategic advantages and connect more efficiently with regional and global markets.
Read More: Choosing the Ideal Business Location in Vietnam: The First Step of Success
7. Young Population
Vietnam’s workforce is characterized by a young and dynamic demographic, with a significant portion of the population under the age of 35. This demographic advantage contributes to the country’s rapid economic growth, making it a prime destination for manufacturing and outsourcing. The workforce is known for its adaptability to new technologies, driven by young Vietnamese professionals with international education and skills.
Read More: Vietnam’s Workforce: High Demand Skills and Advice for Business
8. Low Start-up Costs
This comes as a plus to Singaporean businesses as there are minimal capital requirements for most businesses and industries in Vietnam. As a result, Singaporean businesses can easily enter Vietnamese market with favorable financial plans.
9. MRA Grant
MRA (Market Readiness Assistance) is a government grant that helps SMEs (Small and Medium Enterprises) in Singapore expand their operations into new foreign markets.
Singaporean can gain the maximum support level of up to 80% will be extended for 6 months, until March 31, 2022, following which the maximum support level of up to 70% will be extended until March 31, 2023. With effect from 1 April 2021, the MRA Grant will be upgraded to include Trade Credit Insurance (TCI) as a supportable area under the overseas market set-up pillar, encouraging businesses to protect themselves against buyer defaults in new foreign markets.
Read More: Singapore’s MRA Grant – Market Entry Support for Singaporean SMEs
How InCorp Vietnam can Help You?
For international investors, Vietnam remains a fertile ground. Given the strong commercial ties between Singapore and Vietnam, the benefits are particularly appealing to Singaporeans.
InCorp Vietnam offers a comprehensive range of services with legal specialists to help entrepreneurs and investors set up startup companies and expand their businesses in Vietnam, leveraging the country’s robust investment opportunities.
We made the most detailed step-by-step guide for Company Incorporation in Vietnam for investors, now available as an interactive checklist:
About Us
InCorp Vietnam is a leading market entry and corporate services firm in Vietnam. We are part of InCorp Group, a regional leader in corporate solutions that encompasses 8 countries in Asia-Pacific, headquartered in Singapore. With over 1,200 legal experts serving over 15,000 Corporate Clients across the region, our expertise speaks for itself. We provide transparent legal consulting, setup, and advice based on local requirements to make your business fit into the market perfectly with healthy growth.
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