Friday, 16 September 2016

Singapore, Vietnam set to expand industrial ties

More joint parks planned even as VSIP marks 20th anniversary
By Lee Xin En, The Straits Times, 15 Sep 2016

Ties between Singapore and Vietnam are poised to grow even stronger, with the two countries celebrating two decades of a successful joint venture.

In the southern province of Binh Duong yesterday, Deputy Prime Minister Teo Chee Hean and Vietnamese Deputy Prime Minister Trung Hoa Binh marked 20 years of the Vietnam-Singapore Industrial Park (VSIP) joint venture.

The two parties signed memorandums of understanding to explore two new expansions in Binh Duong and Bac Ninh provinces, potentially adding 1,500ha to the 6,600ha already occupied. The Straits Times understands that new industrial parks are in the pipeline.

Vietnam state-owned enterprise Becamex IDC and a consortium led by Sembcorp Development - part of conglomerate Sembcorp Industries - are behind the VSIP.

The joint venture also unveiled its new corporate logo yesterday which "captures the spirit of partnership and the power of shared aspirations", it said in a statement.

The portfolio of VSIP consists of seven parks across Vietnam, which have created more than 174,000 jobs and drawn US$9 billion (S$12.3 billion) in investments from more than 630 multinational companies.

VSIP co-chairman Nguyen Van Hung, who is also chairman of Becamex IDC, said: "VSIP has been a great success in showcasing Vietnam's sustained economic reform strategy and its abundant market potential, through seven integrated industrial parks across the country.

"The success of Binh Duong has been a key feather in our cap and encourages us to extend this transformation further in Vietnam."

Binh Duong, home to the first two industrial parks, has been transformed from an agricultural area to an industrial powerhouse. By late last year, industries and services accounted for 97 per cent of total economic output, making it one of the top-performing provinces.

The top investor companies in the parks are from Japan and Taiwan, and a significant number are international joint ventures with Vietnamese firms. About 11 per cent of the companies are from Singapore.

In a separate interview with The Straits Times last week, Mr Kelvin Teo, Sembcorp Development's chief executive and VSIP co-chairman, said that while the parks were designed to attract international investors, they also cater for small and medium-sized enterprises. "We know that SMEs don't want to buy big plots of land, so we have built factories for them to lease... We always cater for SMEs through factories and smaller shophouses."

Singapore firm Ramatex, a textile and apparel manufacturer, said it was persuaded to invest in Vietnam last year after eight years of exploratory work there. "We chose VSIP because of our familiarity with the company - it is our first investment there and knowing someone there makes it easier," said the firm's general director, Mr Chris Ma.

Not easy to woo investors in the past
By Lee Xin En, The Straits Times, 15 Sep 2016

Vietnam may be the South-east Asian darling of foreign investors at the moment with its growing middle class and strong economic growth, but it was not always easy to sell the country as a destination for investment.

Sembcorp Development chief executive Kelvin Teo told The Straits Times that the first Vietnam Singapore Industrial Park (VSIP) in Binh Duong province was set up in 1996, just before the 1997 Asian financial crisis.

"Most foreign investors in the region pulled out and cut their losses, but Sembcorp was committed," he said. "During the crisis, it was very challenging. We could not go out to get investors, so in those two, three years, we set up processes, trained people and improved our infrastructure."

After that, Sembcorp played the role of a "mini Jurong Town Corporation, Economic Development Board and Public Utilities Board" for Vietnam, Mr Teo said, as the company sent its investment promotion team to the United States and Japan to seek investors.

Sembcorp's efforts paid off handsomely. When Vietnam joined the World Trade Organisation in 2007, it enjoyed first- mover advantage as the only sizeable industrial park.

While it took 10 years for the first park to take off, the VSIP venture expanded rapidly in the next decade. It built six more parks, which enjoy strong tenancy rates.

More are in the pipeline, Mr Teo said, adding that the Vietnamese authorities approach the company regularly to request a new park.

He added that despite the global economic uncertainty, they have not seen a slowdown in investor inquiries.

While Sembcorp runs industrial parks in China and Indonesia, he said many investors favour Vietnam because of its many free trade agreements.

Vietnam stands to gain much from the Trans-Pacific Partnership (TPP), which may not be ratified by the United States. But Mr Teo said that the "TPP is only one free trade agreement", and that the Vietnamese government will think of resourceful solutions.

He added that the Vietnamese government is looking for higher value-added manufacturing activity such as in precision engineering, pharmaceuticals and medical devices, and that Sembcorp is exploring how to attract higher value-added manufacturers to Vietnam.

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