Unlocking Opportunities: Why Vietnam Emerges as a Prime Market for Australian Investments

Exploring Business Opportunities in Vietnam

The impacts from free trade agreements that both Vietnam and Australia are members would open up new opportunities to attract Australian enterprises to do business in the country.

Vietnam’s market is seen as of a high potential for Australian companies that are looking for possible investment destinations in the near future. Dr Uwe Kaufmann, research discipline lead at the Australia Institute of Business, gave the remarks at the virtual conference discussing solutions to strengthen trade-investment relations between the two countries on December 22.

Challenges and Concerns for Australian Firms

Kaufmann referred to a recent survey assessing Vietnam’s investment and business environment from Australian FDI that revealed only 17% of the respondents consider the market to lack potential. He also rebuffed the geographical distance or the lack of quality of labour force as main reasons for hindering Australia’s FDI in Vietnam, with only 8% noting “Vietnam is too far” and 17% seeing the “productivity and quality of Vietnam’s labour force do not meet the needs”.

On the contrary, Kaufmann said the “Troublesome administrative procedures and bureaucracy” and “Corruption” are considered the two greatest issues of concern for Australian firms operating in Vietnam at 67%.

Current State of Australian Investment in Vietnam

“These are particularly important, especially as investment laws and policies [81%], as well as administrative procedures [76%], are at the top of factors in Vietnam’s investment environment that have a great influence on Australian businessmen’ investment decisions,” he said. In this regard, Director of the WTO Center and Integration under the Vietnam Chamber of Commerce and Industry (VCCI) Nguyen Thi Thu Trang noted Australia currently ranks 19th among countries/territories having investment projects in Vietnam, with the number of projects accumulated to November 20, 2021, of 545, or 1.6% of the total, for $1.94 billion, or 0.5% of the total value.

According to Trang, the figures remained modest given the fact that Vietnam was among the top 20 countries attracting the largest FDI in 2020 and Australia in the top 15 largest investors.

Prospects for Increased Australian FDI

As of December 20, 2020, Vietnam attracted a total of $384 billion in FDI, while Australia’s outbound investment value amounted to $627.3 billion during the period. Trang, however, expected the bright prospects for higher growth in Australian FDI to Vietnam, especially as both are members in three free trade agreements (FTAs), including two new-generation trade deals of CPTPP and RCEP, and the remaining is the ASEAN-Australia-New Zealand Free Trade Area (AANZFTA).

“The impacts from these three FTAs along with 12 others that Vietnam is a part of would open up new opportunities to attract Australian enterprises to do business in the country,” Trang said.

Enhanced Economic Engagement Strategy (EEES)

Echoing Trang’s view, First Secretary of the Australian Embassy in Vietnam Charles Thursby-Pelham mentioned the recent launch of the Vietnam-Australia Enhanced Economic Engagement Strategy (EEES) as a key step for both sides to bolster economic cooperation.

This is especially significant as the EEES highlights the importance of strengthening the rules-based global trading system as the basis for open international trade and working together to address economic challenges and coercive economic practices, he added.

Sectoral Opportunities and Cooperation

Taking a deeper view on the EEES, President of the Australian Chamber of Commerce in Vietnam (AusCham) Simon Pugh said the Strategy is a welcome move as both countries share commitments to trade liberalization and economic connectivity.

“The deal would help both countries take advantage of emerging market opportunities in energy and the green economy amid economic recovery from Covid-19,” Pugh said.

Pugh singled out the education, energy, agriculture-forestry-fishery, manufacturing, tourism, science, and digital economy as key sectors that both sides could strengthen cooperation in the post-pandemic period

Reference: By Nguyen Tung @ The Hanoi Times