As the government pushes to reform and privatise state-owned enterprises (SOEs), certain sectors traditionally monopolised by SOEs will be opened up to competition. This means SOEs will no longer receive subsidies or non-commercial assistance, giving foreign infrastructure players a more level playing field.
As part of its efforts towards driving infrastructure development , the Vietnam government is putting in place frameworks and regulations for public-private partnerships to attract private sector investment. This includes introducing project development funds and gap financing options, while the Ministry of Planning and Investment has also been actively promoting flagship projects.
It is imperative for Singapore companies to pay attention to feasibility studies. As certain ministries and provinces have more experience in the PPP process than others, the origin of a PPP project is critical when assessing its commercial viability. Foreign banks are the most reliable source of medium- and long-term lending, given that dong-denominated long-term debt has not yet been developed.
Singapore companies would do well to partner local privately-owned enterprises with good government links, and look at projects promoted by the Ministry of Planning and Investment or other specialist ministries. We outline the role of public-private partnerships in Vietnam's infrastructure drive and the ensuing opportunities for Singapore firms.
Smart cities are a particular area of interest, with Vietnamese officials keen to learn more about Singapore’s smart nation initiatives. This opens up opportunities for firms with expertise in areas such as intelligent transport system, public safety and security and smart utilities.
The southeast and the Red River Delta in the northeast is buzzing with manufacturing activity. While Hanoi and Ho Chi Minh City remain important industrial centres, there has been increasing MNC presence in provinces such as Binh Duong, Dong Nai, Hai Phong and Bac Ninh. Prominent manufacturing sectors include textile, garments, furniture and electronics.
Continued investments by consumer electronics MNCs such as Samsung, Canon, Intel and Panasonic are likely to bring about opportunities to these companies. But successful manufacturing requires the necessary infrastructure, and this is where Singapore companies can meet the needs of MNCs. Companies should identify key productions hubs where they can provide supporting services such as access to water and power, as well as logistics infrastructure and services.
As Vietnam is well-connected to existing consumer and manufacturing hubs in Asia (China, Taiwan and Thailand), manufacturers can easily integrate Vietnam into existing supply chains. Manufacturing costs in Vietnam are relatively low compared to neighbouring countries – making Vietnam a very viable alternative to China for manufacturing activities.
Singapore manufacturers can also leverage established industrial zones or parks to facilitate their entry into Vietnam. For example, the seven integrated Vietnam-Singapore Industrial Parks (VSIPs) have a wide array of facilities, and are viewed as attractive landing pads for foreign firms. To date, the VSIPs have drawn US$9 billion in investments from over 630 firms to date, and are often held up as a symbol of close ties between Vietnam and Singapore4.
Significantly, 2016 marked the twentieth anniversary of the Vietnam-Singapore Industrial Park joint venture. With a potential expansion of 1,500ha and new parks in the pipeline, industrial ties between Vietnam and Singapore are set to grow even stronger.
4 “Vietnam-Singapore Industrial Park plans expansion after attracting S$12b from over 630 MNCs”, The Straits Times, 14 Sep 2016
Vietnam is seeing rising disposable incomes, growing consumer brand awareness and increasingly competitive retail rents. GDP per capita has reached US$2,3415, while private consumption is expected to grow by at least 6% each year in 2018 and 20196.
Young and increasingly sophisticated Vietnamese consumers are seeking foreign brands, though demand for most imported consumer goods and services is still concentrated in larger cities such as Ho Chi Minh City and Hanoi where incomes are considerably higher than the national average. Vietnam’s retail scene is vibrant, with the development of numerous new retail malls.
As Vietnam continues digitalising, more and more shoppers will turn online. Singapore companies can look at collaborating with in-markets to capture the consumer dollar, and also offer related services such as e-payment solutions or fulfilment options.
With favourable conditions in place for the retail sector to continue growing, here’s a detailed guide on how your business too can capture the growing retail opportunities in Vietnam.
Demand for education and vocational training is also set to grow following Vietnam’s rapid development. Certified training providers can offer skills development courses – both in standalone institutes or as part of programmes with MNCs and industrial park tenants.
5 World Bank, 2018
6 Economist Intelligence Unit, 2017
Vietnam’s current power production capacity is 46 GW. It aims to increase its total capacity to 126GW by 2030. With power production estimated to grow at an annual rate of 14% between 2015 to 2030, the energy sector is expected to attract significant investment over the coming years.
The overall power supply in Vietnam is still unable to meet current demand, especially in the South where demand is pressing. With manufacturing and industrial facilities in full swing, demand is only set to grow over the coming years. This has spurred the government to ramp up its supply through both imports and domestic production.
Although Vietnam has sizeable natural resources – with 700 billion standard cubic metres of proven resources at last count in 2015 – production has levelled off in recent years. The government is forecasting a supply gap, and accelerating its LNG development plans to diversify its energy mix. To further facilitate investment, Vietnam is working to establish a roadmap and legal framework charting the sector’s long-term development. Capability building, policy formulation and pricing mechanisms are some hotly discussed topics as Vietnam looks to commercialise more projects and create more downstream opportunities. This comes amid the government’s decision to replace more coal-fired power plants to gas-fired ones in light of environmental concerns. LNG power plants are expected to contribute 2,000 MW of energy by 2020, with this figure rising to 6,000 MW by 2030.
The LNG sector offers potential areas of collaboration for Singapore firms across the whole value chain. This includes providing engineering, procurement and construction work for complex LNG terminals, as well as building relevant assets such as small-scale LNG carriers and cryogenic storage facilities. Sembcorp Marine, Rotary Engineering and HSL are among Singapore firms which have made significant inroads into the country’s sector.
Vietnam also holds substantial potential for renewable energy sources such as wind, solar and hydropower. Plans are already underway for the government to grow the renewable sector to US$74 billion by 2025.
Solar is an especially bright spot – the Vietnam administration plans for solar to constitute 10% of the total energy mix by 2030. Investors can look at the recently issued Circular 16, which provides detailed guidelines on project development and model power purchase agreements for solar projects. The detailed framework clearly lays out regulations, tariffs and incentives - in turn giving investors more confidence to embark on projects.