Competition for foreign direct investment (FDI) has become tighter among the 10 member-states of the Association of Southeast Asian Nations (Asean). Latest data from London-based Financial Times shows the Philippines at fifth place, with an FDI value of $8.5 billion in 2015.
Indonesia was way ahead of the Asean pack, capturing $38.5 billion worth of capital investments. It was followed by Vietnam, $21.1 billion; Malaysia, $13.4 billion; and Myanmar, $10.8 billion. Countries that captured the largest share of FDIs were those least exposed to the stagnation of the Chinese economy. In 2014, Vietnam topped the FDI list with $23.8 billion, while the Philippines was at sixth place with $7.0 billion, edging out Myanmar at $4.8 billion.
Veteran Filipino economist Gerardo Sicat observed that Vietnam’s rapid growth, averaging close to 8 percent per year, was due to high FDI inflows. In his study published last year, he observed: “this became possible when, despite its economic system of state enterprise control (a feature of communism), the government allowed a liberal opening of the economy to the world, to FDIs, and to rely on the market mechanism to propel its growth process.”
Sicat said Vietnam’s main sources of FDI investments are Japan, South Korea, Taiwan, China and Asean. “In the short time from the late 1990s, Vietnam’s policy of inviting FDIs has succeeded well,” said the Philippines’ first economic planning secretary.
During a recent trip to Hanoi, I noticed the marked progress of the Vietnamese capital compared to my last visit there almost six years ago. The most recent additions to Hanoi’s skyline are the Landmark 72 Tower and Lotte Center. New bridges across the Red River have also been built after the city celebrated its 1,000th anniversary in 2010.
Traffic was orderly in this city of 7.7 million people and 4.5 million motorbikes. Its central business district revolves around Hoan Kiem Lake, close to the French-era Vietnam Opera House and the Hanoi Stock Exchange beside the headquarters of top Vietnamese banks. At Ba Dinh Square where the founder of modern Vietnam, Ho Chi Minh, declared its independence from Japanese occupation in 1945, his preserved body inside a massive granite mausoleum dominates the district that houses the presidential palace and parliament buildings.
I joined this historical and agri-business tour of northern Vietnam as a judge in the Bright Leaf Agriculture Journalism Awards presented annually by PMFTC Inc. Together with the 2015 awardees, we were billeted at the century-old Sofitel Legend Metropole Hanoi, where world leaders and Hollywood celebrities have stayed (two of whom, Samuel Jackson and John Goodman, were at the hotel lobby when we were checking out).
Highlighting our trip were visits to the Temple of Literature and Hoa Lo Prison, known as the Hanoi Hilton during the Vietnam War, as well as culinary feasts at Laotian, Chinese fusion, and Viet pho dining meccas. By land, Laos is just 14 hours to the west, while China’s nearest border town in Guangxi province is only 12 hours north of Hanoi.
We took a full-day excursion to Halong Bay, a UNESCO World Heritage Site around 180 kilometers northeast of Hanoi. Driving through miles and miles of lush rice lands interspersed with industrial estates along well-maintained highways, we stopped over at the quaint town of Hai Duong and the Mikimoto pearl farm in Halong City before taking a bay cruise aboard the HaiLong Dream. There we saw breathtaking limestone cliffs similar to those in Palawan’s El Nido and Coron, as well as massive limestone caves akin to Callao in Cagayan.
While state-owned enterprises produce about 40 percent of Vietnam’s GDP, the country’s socialist leaders have taken steps to liberalize the economy and integrate it globally. In fact, we hardly noticed that communism is the prevailing system there since capitalism is thriving in both urban and rural areas. An agricultural industry that has been booming is tobacco due to very few restrictions on usage, making the Socialist Republic of Vietnam a smoker’s paradise.
According to the country’s leading international business newspaper, Vietnam Investment Review, developments in the south are even more amazing, especially in Ho Chi Minh City, still popularly known by its former name Saigon. Expat real estate professional David Blackhall said “so long as the economy continues to perform, the structural elements of rapid urbanization, decreasing household sizes, and the young population will underwrite property demand in 2016.”
It’s quite ironic that Vietnam, America’s former war enemy, attracts more US investors nowadays than the Philippines, which is the only former American colony in Asia. Vietnamese commercial relations with the US took almost 20 years to get re-started after the Vietnam War ended in 1975.
From zero exports in 1993, Vietnam’s trade volume to America reached $36.3 billion in 2014. This is expected to expand further after Washington lifted the 32-year arms embargo on Hanoi during the recent state visit to Vietnam by US President Barack Obama. Can we still catch up?
J. Albert Gamboa is the CFO of Asian Center for Legal Excellence and Senior Producer of Bloomberg TV Philippines.