Vietnam’s establishment of a manufacturing supply chain ecosystem over the past 35 years with a focus on high value FDI is absolutely right and commendable.
Mr. Joon Suk Park - Head of International Subsidiary Banking, Wholesale Banking, HSBC Vietnam, shared his ideas on the issue.
|Joon Suk Park - Head of International Subsidiary Banking, Wholesale Banking, HSBC Vietnam.
Vietnam’s government is focusing on high value investment. How can high value FDI support Vietnam’s economy?
Vietnam has over the years successfully transformed into an export led, FDI important economy where the latter contributes to more than 70% of the country’s exports. The manufacturing sector surrounding electronics and textiles & garments has been the key drivers. High value investments cover a broad range of sectors including semiconductors, renewables, wider EV ecosystem, logistics and warehousing, data centers, FMCG, e-commerce as well as higher education. These are value added industries poised to take Vietnam to the next level of qualitative growth.
Vietnam has over the past 35 years learned and experienced the benefit of establishing a manufacturing supply chain ecosystem. The strategy to focus more on high value FDI attraction is absolutely the right direction, and it’s commendable. Focusing to encompass and comprehensively buildout the relevant regulatory and operational landscape conducive to attracting those sectors are equally very important. There are many forms of incentives beyond tax and these include areas where many global multinationals would place considerations prior to making investment decisions. Firstly, whether there is indeed promising outlook for those high value sectors including the availability of related sector local suppliers; secondly, whether there are efforts being placed in the country to forge a sustainable ecosystem surrounding those sectors; thirdly, the view around the availability of quality resources especially in the fields of engineering and R&D researches; and lastly, the transparency of corporate governance as well as regulations.
In Vietnam, which sectors are most attractive to high-value FDIs?
There are several characteristics or market motivating features that Vietnam brand has been able to garner over the years and these will help to define the sectors most attractive to high value added FDIs. HSBC believes that by 2030, Vietnam’s domestic consumption market will outsize that of UK, Germany and Thailand and rise to the ranks of top 10 globally. This is backed by the rising middle income class and young, tech savvy average population. The e-commerce, data centers, FMCG and higher education will all be the relevant high value added sectors. Vietnam is also blessed with the favorable natural conditions enabling the success of the wider renewables sectors. Vietnam has also learned from the past 35 years of experience and knowledge to establishing manufacturing supply chain ecosystem and this will support the attraction of high value added FDIs beyond electronics and into sectors such as the semiconductors and the wider EV industry.
When the government is focusing more on high-value FDI, do you think it will limit Vietnam’s opportunities in attracting FDI?
Focusing on high value FDI is absolutely the right direction to pursue from a strategy point of view. And for this to be realized, the relevant infrastructure and supply chain ecosystem require to be set in motion with pace. However, at the same time, the wider FDIs across various different sectors and industries are still very much relevant to the success of the Vietnam story. Establishing the electronics manufacturing ecosystem and bearing fruit has taken many years. In early 2000, the export of electronics goods was less than 5% of total exports. Today it accounts for more than 35%. Hence, the observation is that it takes many years to establish a new sector and industry and embed into the wider ecosystem. Hence, we should both avoid the perception of Vietnam focusing largely on high value added FDIs as well as de-risk from any potential gap in FDI inflow, which is so paramount to the country’s exports as well as the economy.
What can HSBC support FDIs and bridge them to high-value sectors?
HSBC Vietnam is able to provide an effective support in laying the nexus for those high value FDI investments to flow into Vietnam. The vast international network allows the broad focus and engagement of those international multinationals considering to make entry into Vietnam. HSBC has also been operating across wholesale and retail banking, the deep footprint of 153 years in the country has contributed to gaining local market insights as well as placing the Bank in the position to advise the global and regional multinational companies effectively in navigating the journey into Vietnam. HSBC is also proud to be a market leader in sustainable financing across the different regions and will continue to play a meaningful role to building out the sustainability landscape for Vietnam.
Thank you for your time!