14:31 | 25/01/2018 Economy
Hong Kong is keen on investing in infrastructure projects in Vietnam — a blessing given the country’s immense need for infrastructure financing to keep pace with its rapid economic expansion.
|Part of line 1 of the HCM City Metro urban railways system over the Saigon River in HCM City - Source: VNA|
Vincent H S Lo, chairman of the Hong Kong Trade Development Council said in a recent interview that Vietnam is a very attractive destination for Hong Kong investment given its large population and rapid economic growth.
“Hong Kong is keen on investing in infrastructure in Vietnam, especially now with the Belt and Road Initiative,” Vincent said. He said more trade will follow, including tourism and then manufacturing, once sufficient infrastructure is built.
Initiated by China in 2013, the “Belt and Road Initiative” is an ambitious strategy to promote economic co-operation along land and sea corridors spanning 65 countries throughout Asia, Europe and Africa. The area’s massive demand for infrastructure is estimated at 1.7 trillion USD a year through to 2030.
As a country participating in the initiative, Vietnam, among the fastest-growing nations in the world, is also leading in the infrastructure race.
The country has targeted gross domestic product (GDP) growth of 6.7 percent in 2018 after recording a nine-year high with GDP growth of 6.8 percent in 2017. It is boosting infrastructure to lure more foreign investment as well as keep its position as one of Asia’s next "Tiger" economies.
Vietnam has spent about 5-6 percent of GDP on infrastructure development in recent years, the highest in Southeast Asia and comparable with China’s 6.8 percent, according to the Asian Development Bank.
The sixth largest economy in the ASEAN bloc needs to invest an estimated 400 billion USD in infrastructure over the next decade. Given the huge financing gap, the country is endeavouring to attract non-State, private and foreign resources into infrastructure projects, especially in the form of public-private partnerships (PPP).
“Infrastructure is typically very long term, so you need to have stable transparency as well as provide incentives and guarantees for investors to make 20-30 year investments,” Vincent said.
He suggested the Vietnamese Government make further reforms on market conditions, offering incentives, especially tax incentives, guaranteed return and market opening to attract more foreign investment, just like China did 20 to 30 years ago.
Vincent said a few projects were planned during his visit to Vietnam last May but declined to disclose further as the companies have not announced it themselves.
“We will definitely continue to come to Vietnam and make further investments,” Vincent said.
In November, the South China Morning Post said Hong Kong companies have expressed interest in taking part in the development of subway projects in Ho Chi Minh City and Hanoi.
Bilateral trade partnership between Vietnam and Hong Kong has increased steadily in recent years.
Vietnam is Hong Kong’s ninth-largest trade partner worldwide and biggest export market in ASEAN with two-way trade value reaching 16.4 billion USD in the first eleven months of 2017, surpassing the 2016’s total figure of 9.3 billion USD.
As of November 2017, Hong Kong’s annual imports from Vietnam touched 7.2 billion USD while its exports to Vietnam hit 9.2 billion USD. Hong Kong has also been among top 10 biggest FDI investors in Vietnam with total registered investment hitting nearly 18 billion USD.
In November last year, after three years of negotiations, ASEAN members and Hong Kong finally signed a Free Trade Agreement (FTA). Together with ASEAN-China FTA, economic cooperation between the two sides is expected to grow at a much faster pace.
“Hong Kong would like to be a springboard for Vietnam but the country must make itself more attractive,” Vincent said, adding that many investors are looking for opportunities in Vietnam.
Hong Kong is an important entrepôt for trade between mainland China and Vietnam, with 60 percent of re-exports of goods originating from the Chinese mainland.