Sharpening Vietnam’s appeal as an investment destination

ANZ Banking Group CEO Mike Smith

It has been 18 months since your last visit to Vietnam, what changes have you seen in the economy?

Well, since my last visit in March last year, a lot has happened. A lot has happened in the world, and I think from my perspective so far, development here has been very positive. Certainly things seem to have improved, it was very slow 18 months ago. The only issue facing the country is its relationship with China, which is really a critical issue. Things seem to be a lot better, but of course China is very necessary to Vietnam, their connection is quite close. However, it is very encouraging to see other investors from Japan, Korea, Taiwan, Europe, the US, and also from Australia, increasing their investments in Vietnam. That should continue.

Some multinationals have increased their investments into Vietnam recently and many people are saying the country could be a manufacturing hub in Asia. Do you agree? How will ANZ help lure more foreign investors to Vietnam?

Yes I do. I think the secret to inward investment is really always off the back of making trade easier between nations. And what will happen in ASEAN and various free trade agreements that have been created by Vietnam and other countries and blocks are similar to the initiatives concerning APEC and indeed what is happening in the G20 this year. Our role is to facilitate trade, which leads to investment. One thing that is important to Vietnam right now is the Trans-Pacific Partnership Agreement, and we hope to see some positive movement on that. I think that could be a good new story for Vietnam, because once you have trade flow, investment flow always follows. That’s going to be a good thing. So I think more effort needs to go towards promoting trade and removing some tariff barriers if possible, around the region, and globally.

Vietnam is being touted as a good choice for investment, but other countries in the region are also working to lure inward investment. What should Vietnam do to achieve its goals?

Capital goes where it is welcomed and capital goes where it is most easily used. So it is very important for any country to try and encourage the inflow of capital. Because, we have a lot of choices. Now I think China is becoming too expensive. It has started to increase the amount of regulations on international companies. And therefore, this increases costs, and international companies are looking for other places to set up operations. Vietnam is one choice, but Vietnam also has to understand that it is competing for that capital with countries like Cambodia, Laos, Bangladesh, Myanmar and the Philippines. So it is important for Vietnam to understand they are in a competition here. The government should improve access to international companies as much as they can. The more access the better, because that will create huge inward investment, which will create jobs, and of course, growth.

How will inward investment affect local companies? And what has ANZ done to help local companies seize opportunities from multinational companies?

Let me give you an example. Many international companies have invested in Vietnam, producing products for export. Initially they just import and assemble in Vietnam, but over the last two years we have actually seen local suppliers developing packaging products for multinationals. So now the packaging is not imported because it is made in Vietnam. The paper may be imported, but the packaging is made here. They supply this to multinational companies who then put the product inside for export. So from the banking side we do support suppliers because we know that supplying multinational companies is good. Those products can then be exported worldwide, to places like Japan and Korea. So I think investment does have an immediate impact, but over the next few years there is a chance to create a supply chain in Vietnam. What Vietnam needs to do is capture as much of the supply chain as possible and produce components, because each one will provide further value. From the bank’s side, we are providing working capital and expertise, without which you can’t operate.