Cooperation with Singapore is gaining momentum

Singapore and Vietnam have agreed to upgrade their strategic partnership, established in 2013, to a Comprehensive Strategic Partnership (CSP) in 2023. Both sides are working hard to develop many new areas of cooperation that will make this expansion relevant and meaningful in the years to come.

Pang Te Cheng, Consul General of Singapore in Ho Chi Minh City

At the same time, free trade agreements (FTAs) such as the ASEAN Free Trade Area (AFTA), the Comprehensive and Progressive Agreement for Trans-Pacific Partnership and the Regional Comprehensive Economic Partnership play a role in increasing economic cooperation between Vietnam and Singapore. These agreements promote trade liberalization, reduce tariffs and create a favorable business environment for companies operating in both countries.

For example, in 2023, bilateral trade between the two countries was expected to reach around $21 billion, almost double the amount from a decade ago, demonstrating AFTA’s effectiveness in facilitating trade.

These free trade agreements serve to emphasize the benefits of an open, rules-based international trading system, amid growing trade protectionism by the major trading countries that established that system. Economic cooperation between Vietnam and Singapore has traditionally been based on the Singapore-Vietnam Communications Framework Agreement (CFA). First launched in 2006, the CFA covered cooperation in six pillars: education and training; finance; IT and telecommunications; investment; trade and services; and transport.

The CFA has strengthened economic cooperation in many sectors and facilitated smoother business operations for companies in both countries. For example, Singapore has been one of Vietnam’s top three investors for over 20 years. Singapore’s top investment sectors include financial and insurance services, manufacturing, real estate, and wholesale and retail trade.

Since May, Singapore has invested a total of about $75 billion in Vietnam, making it the second-largest investor. In terms of flow, Singapore has been Vietnam’s largest investor since 2020.

According to the Foreign Trade Agency of the Ministry of Planning and Investment, between January and July 2024, Singapore was the largest investor among 91 countries and territories, registering investments of $6.52 billion – more than a third of recorded foreign direct investment during the period. Bilateral trade has also grown steadily over the past decade. In 2023, Vietnam was Singapore’s 11th-largest trading partner.

In August 2023, the CFA was expanded to include cooperation in new and emerging areas: energy, sustainability and innovation.

A comprehensive perspective

Even as Vietnam and Singapore work to finalize the CSP, cooperation in new identified sectors continues to develop at a rapid pace. The enhanced CFA will be one of the building blocks of the CSP, as will the Green-Digital Economic Partnership Memorandum signed during Prime Minister Pham Minh Chinh’s visit to Singapore in February 2023.

Although talks are still ongoing, it is possible to imagine further cooperation in several areas.

Green Technologies: First, with a shared commitment to sustainable development and net-zero carbon emissions, Vietnam and Singapore can cooperate on green technologies and renewable energy projects.

Singapore’s expertise in urban planning and sustainable infrastructure can support Vietnam in its efforts to develop eco-friendly cities and reduce carbon emissions. Studies are ongoing on the feasibility of Singapore importing green energy from Vietnam, such as from wind farms in southern Vietnam and green hydrogen/ammonia.

Innovation Collaboration: Both countries recognize the importance of technology and innovation in driving economic growth. Joint R&D initiatives in areas such as smart cities, e-government, renewable energy, fintech, AI, biotechnology and semiconductors will increase the competitiveness of both countries in the global market.

In 2022, the Singapore Ministry of Trade and Industry signed an MoU with the Vietnam National Innovation Centre. The working group aims to promote innovation cooperation between the public, private and higher education sectors in both countries.

Digital Transformation: Given Vietnam’s interest in innovation, digital transformation and the digital economy, possible areas for government-to-government cooperation include digital connectivity, cross-border data, cybersecurity and e-government tools.

In 2022, National Computer Systems announced a partnership with Vietnamese IT giant FPT to expand its service capabilities in the market and is expected to employ more than 3,000 people by 2025. Just last month, a business-matching event on AI was held in Ho Chi Minh City. On the financial front, banks on both sides are also exploring the implementation of cross-border QR code payment connectivity to facilitate payments for tourists.

Economic resilience: The recent pandemic has highlighted the need for economic resilience and diversification. Vietnam and Singapore can build more robust supply chains and reduce dependence on external markets. This cooperation will be crucial in coping with future economic uncertainties.

For example, the two countries are considering exporting frozen and heat-treated poultry products to Singapore and beyond, as well as selling processed meat from Singapore to Vietnam.

Cultural Exchanges: Strengthening cultural exchanges and people-to-people ties will be essential to foster mutual understanding and cooperation. Initiatives to promote educational exchanges, tourism, and cultural programs will help build a deeper bond between the two nations.

Education Development: Education is the cornerstone of bilateral relations. By strengthening educational exchanges and cooperation between schools and higher education institutes, both countries can better equip their workforces to meet the demands of a rapidly changing global economy.

The existing education agreement, renewed in 2023, will provide more links between Singaporean and Vietnamese schools through the School Partnership Programme, internships, etc. Universities from both countries have also signed agreements to promote staff and student exchanges, training and internships, including technical and vocational education, and lifelong learning.

Enhanced Political Dialogue: The CSP will facilitate more frequent and higher-level political dialogues, enabling both countries to jointly address regional and global challenges. Annual Prime Ministers’ Meetings will begin in 2024, which will also provide high-level oversight and direction for bilateral cooperation, including the timely implementation of the CSP.

Regional Cooperation: Both countries are committed to maintaining ASEAN’s centrality in regional affairs, which in turn depends on ASEAN’s autonomy, credibility and coherence, and consolidating ASEAN’s relationships with key dialogue partners. By working together, Vietnam and Singapore can help shape ASEAN’s economic agenda, promote regional integration, implement the vision of the ASEAN Outlook for the Indo-Pacific, and maintain regional stability and security.

Singapore and Vietnam will cooperate even more closely on trade arrangements, including new mechanisms such as the Indo-Pacific Economic Framework for Prosperity. In fact, during the June meeting on the framework in Singapore, Singapore, Vietnam and the US agreed to establish a joint working group to strengthen investment in renewable energy projects in the region, as well as explore the development of a regional submarine cable network to facilitate cross-border electricity trade.

Towards the next stage

Twenty years ago, when I started working at our embassy in Hanoi, Vietnam was considered a peaceful land that attracted birds to nest. Today, I am delighted to see Vietnam thriving. GDP per capita has almost quadrupled since 2010, and registered foreign investment has increased from less than $16 billion to $36 billion. Despite this, Singapore remains the largest investor in terms of flow.

To me, this is an anomaly, given the small absolute size of Singapore’s economy. Vietnam’s ambitions should be much higher – to make big players like the US, Japan, South Korea or China the biggest investors, because they can invest many times more than Singapore.

Having made significant progress, the next stage of Vietnam’s development can be expected to be more difficult, and the conditions must be very attractive to attract the largest and most advanced players. I believe Singapore can play a role. But Singapore is a small country and has resource constraints.

Under the CSP, a suitable pilot project could probably be identified to use Singapore’s experience as a reference point, but adapted to Vietnam’s unique circumstances, culture, environment and stage of development. New policies could be piloted; lessons learned could be used to pragmatically adjust along the way, with a view to eventual expansion to other parts of the country. Such collaboration would generate deeper cooperation between Singapore and Vietnam for many years to come, but would require continued political support.

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