Why Vietnam is attractive for foreign investors
Maggie Foong is Country Manager of Hapag-Lloyd in Vietnam. In an interview, she explains how the market has grown over the past 15 years, why it is attractive for foreign investors and why more and more production facilities are being relocated from China to Vietnam.
You have lived in Vietnam since 2003 – how has the country developed since then?
At the beginning, life in Ho Chi Minh City was very quiet, but progress has brought about many changes in the country and also turned the city into a bustling urban centre. Today, Vietnam is one of the fastest-growing countries in Southeast Asia.
What drives the economy in Vietnam and what are the future prospects?
The Vietnamese economy is dependent on manufacturing and exports. Coffee is the country’s main export product. With a growth rate of 2.8 to 3 percent for 2018, the country looks set to establish itself as the world’s second largest coffee exporter.
In addition, there are a large number of young, well-trained workers here – this enables the country to attract foreign investors who invest in the labour-intensive production of inexpensive goods such as furniture and clothing. This is also reflected in the gross domestic product: Vietnam achieved a GDP of 6.8 percent in 2017; a GDP growth of 6.5 to 6.7 percent is expected for 2018. According to the National Statistics Office, the GDP increased by around 7.4 percent in the first quarter of this year alone.
Why is Vietnam so attractive for foreign investors?
Labour costs are low and there are attractive state tax incentives. For these reasons, numerous foreign investors have already set up manufacturing plants in the many industrial parks in northern, central and southern Vietnam, including well-known brands such as Samsung, Nokia, Intel, Panasonic and LG Electronics.
In addition, the government is making great efforts to attract more foreign capital into the country. In recent years, production facilities have increasingly been relocated from China to Vietnam. This trend is expected to continue as China is becoming more expensive and faces geopolitical problems.
What other factors make Vietnam an attractive market?
The Free Trade Agreement between Vietnam and the EU is expected to be signed by the end of the year. The EU is the country’s second largest export market, and therefore import and export volumes in business with the EU will increase from 2019 onwards. Another free trade agreement, the CPTPP, was signed in March 2018. For Hapag-Lloyd, this means more opportunities in the shipping routes of Canada and Latin America – and for customers a better connection for the transport of their goods.
What is Hapag-Lloyd doing to optimise the customer experience on site?
We have assigned our most important local customers – including Kuehne + Nagel, DB Schenker, DSV, Panalpina, DHL, but also Nike and Sabic – their own sales and customer service contacts. This was done because these customers have high expectations of good service. The responsible team has excellent product knowledge and understands the requirements of the respective customers. We want our customers to be satisfied with our overall performance and at the same time enjoy working with us.
What challenges do you currently face?
We want to strengthen relationships with our customers and offer them even better service – here we are focusing on the European, Transpacific, Mediterranean and Middle Eastern shipping areas.
We also want to increase imports into Ho Chi Minh City and strengthen our presence in the north of the country. A new international terminal in the port of Cai Mep Vung Tau in south-eastern Vietnam will start operations in the third quarter of this year. This new opening will increase competition among the terminals and offer opportunities for cost optimisation.
In southern Vietnam, the Mekong Delta offers the possibility of direct freight collection instead of via Vung Tau and Ho Chi Minh City. We are closely monitoring this market and hope to have the opportunity to expand our share of the reefer business.
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