International trade between Vietnam & Singapore

Members
NGUYEN NHU TUAN TRAN TAM TRANG CAO LAN PHUONG NGUYEN NGOC HANG MY NGUYEN HONG NHUNG

December 27 th 2011

GROUP ASSIGNMENT
Topic: Choose a country or a region that Vietnam has trade relation with and do the analyses:

INTRODUCTION
Vietnam has carried out an economic renovation for more than 20 years. This process was the result of a shift from central planning to a market-based economy and from an agriculture-based to an industrialized country. Therefore, integrating into the global economy is important for Vietnam. Engaging in foreign trade and attracting foreign direct investment played a key role in Vietnams economic development. In the past decade, Vietnam has recognized the importance of growing global economic interdependence and has made concerted efforts to adjust its foreign relations to reflect the evolving international economic and political situation in Southeast Asia. This paper focuses on the trade relation between Vietnam and Singapore.

I The background of the relationship between Vietnam and Singapore 1. Relationship establishment On 1st, August 1973 Vietnam and Singapore officially established the diplomatic relation. Vietnam Embassy was placed in Singapore on 12/1991 and on 9/1992 Singapore Embassy in Vietnam was set up. However, after Vietnam joined ASEAN in 07/1995, the relationship between Vietnam and Singapore reached a higher level. Singapore values the relationship with Vietnam because Vietnam is one of the most important trading and invest partner in ASEAN. The governors of 2 countries have a lot of visits to the partner country to exchange, learning experience and improve the knowledge between two countries. 2. Partnership Former Minister of Prime Phan Van Khai in the visit to Singapore, 2 coutries agreed to make connection between Vietnam and Singapore by 6 fields: finance, investment, trading-service, transportation, telecommunication- information technology and education a. Trade and Invest Since 1996, Singapore ranks consistently as one of the most important trading partner. The expansion of trade and business contacts between Vietnam and Singapore over years has also been a significant factor in building strong bilateral ties. Economic relations are supported by the Connectivity Framework Agreement which is overarching platform for bilateral economic cooperation to build upon the strengths and competencies of both countries to accelerate Vietnams growth and promote Singapore active participation in this process. Due to the implementation in early 2006, the Connectivity Framework has achieved good process in facilitating several significant investment projects by Singapore companies. Therefore, Singapore becomes the second biggest trading partner of Vietnam in 06/2011. Moreover, the two Vietnam-Singapore Industrial Parks (VSIP) 1

and the Vietnam-Singapore Vocational College in Binh Duong Province and the Vietnam-Singapore Training Centre in Hanoi are the symbols of the close cooperation between the two countries. b. Other cooperation fields: Besides trading relationship, Vietnam and Singapore cooperates in many potential resources such as tourism or education. Free Visa of Vietnam to Singapore and vice versa affirms the strong development of Vietnam-Singapore tourism. Furthermore, Singapore is the first country which opens its agency in Vietnam so it promote strongly and stably Singapore tourism and accelerates the number of Vietnam visitors to Singapore and vice versa. On the other hand, Singapore is honored to play a role in Vietnam human resources development. Since 1992, more than 10,000 Vietnamese have received training in Singapore under Singapore Cooperation Programme such as healthcare, environment, finance and trade, productivity, public administration and English language training. Singapore has been provided scholarship to Vietnamese students to pursue academic course including, among other, the ASEAN secondary three Scholarships, the Singapore Scholarship and the NUS Master in Public Management and Master in Public Policy Programmes.

3. Expansion in developing trade and investment with Singapore Department of foreign investment (Vietnam) and Department of Economic Development (Singapore) cooperate to choose the effective projects and promote the acceptance of these projects so it attracts the investors all over the world. The combination of Vietnam and Singapores strength with the capital from third country will create the competitive attraction from foreign investors. It is known that Singapore is the mother country of thousands of national companies and connected globally. Cooperating with Singapore also means to study the experience in managing the country, developing technology, applying modern science and education. II The development of international trade between the two countries including trade volume, trade structure and trade policy. Trade relations between Vietnam and Singapore had a turning point when Vietnam took part in Bali concord in July 1992. In detail, there were many trade policies established by both countries in this year. Firstly, Maritime Trade Agreement and Agreement on Air Transport were set in April 1992. Besides that, Vietnam and Singapore contracted Trade Agreement in September 1992 as well as Agreement on the Promotion and Protection of Investments in October 1992. On 14 May 1993, Agreement on Cooperation in the field of management and environmental protection was signed. In March 1994, both nations set Agreement on avoidance of double taxation. Moreover, there was an establishment at Agreement on tourism cooperation in August 1994. After Vietnam had become a member of ASEAN in July 1995, international trade between the two countries developed dramatically. A shining example is the Singapore Vietnam Connectivity Framework Agreement which was set on 6 December 2005. Thanks to the agreement, capability of trade and investment is motivated and enhanced. In addition, the benefit of both nations is also improved and increased. Therefore, Singapore has been always one of the biggest trade partners of Vietnam.

As a result, total bilateral trade volume in 2005 was 6.4 billion USD in which Vietnam exported 1.8 billion USD and imported 4.6 billion USD. It could be seen that the number was higher and higher through years. The reason was 12.05 billion USD of total export - import turnover in 2008. Particularly, export volume of Vietnam was 2.6 billion USD and import volume was 9.3 billion USD. However, in 2009, the figure of total bilateral trade turnover dropped sharply by a half, from 12.05 billion USD to 6.32 billion USD. In detail, importations of Vietnam in 2009 decreased rapidly at 4.2 billion USD while the exportation of Vietnam in 2009 only declined slightly by 2.07 billion USD. An insignificant decrease of total trade turnover in 2010 occurred at 6.2 billion USD. Referring to export turnover in that year, there was a slow growth by 2.12 billion USD. Turning to import turnover, the number 4.1 billion USD indicated a gradual fall of importation. Total trade volume continued to go down at 4.4 billion USD in first six months of 2011. In particular, Vietnam exported 1.16 billion USD which equals half of the figure in last year. Besides that, importation of Vietnam dropped substantially at 3.2 billion USD.

With regards to trade structure, there are many similar points as well as some different points between Vietnam and Singapore in export-import structure.

The main product groups Vietnam exports to Singapore are crude oil, rice, computers, electronic products and components, machinery, equipment, spare parts, types of fuel, glass and glass products, types of iron and steel, mobile phone and components, coffee, textile products. Nevertheless, export turnover of rice in first ten months of 2011 had a reduction of 13.1 % compared to first ten months of 2010 (from 207.4 million USD in 2010 to 180.2 million USD in 2011) . Similarly, export volume of crude oil declined 39.7% (from 580.18 million USD to 349.7 million USD). Just like that, turnover of textile products went down 1%. In contrast, volume of machinery, equipment and spare parts had an increase of 29.8% (from 129.07 million USD in 2010 to 167.5 million USD in 2011). Turnover of computer, electronic products and components had a rise of 18.8% (from 189.1 million USD to 224.6 million USD). One of types of iron and steel went up 80.4% (from 35.05 million USD to 63.2 million USD). Moreover, glass and glass products had a growth of volume of 38.2% (from 78.7 million USD to 108.7 million USD). Turnover of types of fuel increased 13.4% ( from 59.4 million USD to 67.3 million USD) while that of coffee had a growth of 60.8% ( from 13.07 million USD to 21.02 million USD).

The main product groups Vietnam imports to Singapore are types of fuel; plastic material; mineral oil products; machinery, equipment and spare parts; computers, electronic products and components; types of paper; chemical products; chemicals; iron and steel products; vehicles and accessories; milk and milk products. However, the import turnover of types of fuel in 2010 declined 11.99% compared to 2009 ( from 2.3 billion USD in 2009 to 2.05 billion USD in 2010) while the volume of plastic material went up 27.67% (from 202.4 million USD in 2009 to 258.4 million USD in 2010). Furthermore, turnover of vehicles and accessories increased dramatically by 4409.6% (from 5.1 million USD to 234.1 million USD). In contrast, volume of computers, electronic products and components went down 4.03% ( from 237.9 million USD to 228.3 million USD). In addition, turnover 3

of machinery, equipment and spare parts fell substantially at 61.57% ( from 587.3 million USD to 225.7 million USD) whereas one of mineral oil products rose 5.6% (from 194.6 million USD to 205.5 million USD). Besides that, types of paper had an increasing volume at 31.48% (from 87.6 million USD to 115.3 million USD). Moreover, there was an increase in turnover of both chemical products by 16.61% ( from 81.6 million USD to 95.2 million USD) and chemicals at 18.6%.(from 57.2 million USD to 67.8 million USD). In addition, iron and steel products has a decreasing volume at 32.56% ( from 54.01 million USD to 36.4 million USD).

In general, it can be seen that total export import turnover between Vietnam and Singapore tends to decline although Singapore is one of five market which have large trade deficit of Vietnam. The table below will show you the main import items: (unit USD) the first 6 months in 2011

Singapore Petroleum Plastic Materials Petroleum products Machinery, equipment, tools & accessories Computers, electronic products and components Assorted paper Chemical products Chemical Products from iron and steel Means of transport and spare parts Milk and milk products

Unit Ton Ton USD USD USD Ton USD USD USD USD USD

Quantity 2,686,116 74,221

USD 2,293,082,431 143,040,193 140,918,078

0 0 14,326

118,369,258 89,683,764 67,330,640 55,257,378

38,683,525 33,702,999 26,949,635 26,192,313

The main exports: USD unit, the first 6 months in 2011 Singapore Crude oil Unit Ton Quantity 364,796 USD 318,563,131

Computers, electronic products and components

USD Ton 212,992

115,865,155 104,823,297

Means of transport and spare parts Machinery, equipment, tools & accessories Petroleum
Glass and glass products Iron and steel Cell phone and accessories Coffee Textiles and garments

USD

99,857,333

USD Ton USD Ton USD Ton USD

0 65,035 0 42,297 0 10,314 0

81,446,305 56,371,188 47,449,395 42,720,276 37,136,296 21,003,339 13,676,641

Export value of goods from Vietnam to Singapore , the first 10 months in 2011

Type

Turnover in export Oct/2010 (USD)

Turnover in export Oct/2011 (USD)

% increase, decrease turnover over the same period +3 + 32,4 + 10 - 0,9 + 60,8 + 231,4 - 13,1 + 2,5

Total Sea food Vegetables Cashew nuts Coffee Pepper Rice Bakery and cereal products Cruel oil Petroleum

1.819.849.446 59.200.084 12.344.000 6.792.190 13.071.199 5.766.305 207.446.796 3.830.011

1.874.680.609 78.379.731 13.580.887 6.731.878 21.024.934 19.110.340 180.272.457 3.927.457

580.183.890 59.425.985

349.732.566 67.387.167

- 39,7 + 13,4

Ores and other minerals 24.118 Chemical products 11.106.567 13.899.472 5 + 25,1

Plastic materials Plastic products Rubber

4.355.237 14.781.716 2.453.277

4.484.291 13.682.170 684.573 4.725.240

+3 - 7,4 - 72,1 + 85,1

Bags, wallets, suitcases, 2.552.116 hats and umbrellas Woods and woods products Paper and paper products Textiles and garments Shoes 8.742.382

18.005.622

+ 106

18.201.186

20.434.609

+ 12,3

23.369.185 11.383.953

23.158.783 16.821.544 108.763.184 63.229.738 17.701.106 20.602.496

-1 + 47,8 + 38,2 + 80,4 + 27,9

Glass and glass products 78.721.866 Iron and steel 35.052.830

Iron and steel products 13.840.646 Other metal and products Computers, electronic products and components Cell phone and accessories Machinery, equipment, 129.077.966 tools & accessories Wires and cables 18.321.298 189.104.397

224.607.347

+ 18,8

73.887.139

167.507.964

+ 29,8

23.419.499 169.144.381

+ 27,8 + 768,9

Means of transport and 19.466.785 spare parts

III- The opportunities and challenges to the country Expanding trade with Singapore brings a lot of opportunities as well as new challenges to Vietnamese economy.

1. Opportunities: 1.1 Attracting foreign investment: As the world financial crisis is spreading, Vietnam is not an exception. The country's economy is in recession and affected by the world financial crisis. The flow of foreign direct investment and portfolio investment (FDI) has suffered. However, Singapore stands for number three in the list of 52 countries and territories have invested in Vietnam this year. It takes U.S $1.58 billion, account for 12.5% total FDI. Singapore investment is the big opportunity for Vietnam to deal with recession and improve our economy. Moreover, Singapore has a wealthy global economy, it owns thousands of companies which are connected over the world, Vietnam can take advantage of economic of scale when cooperate with Singapore. 1.2 Exchange knowledge Singapore has an educational system that much better than Vietnams. When trade relationship between two countries is improved, it will create more opportunities for exchanging knowledge among two countries. Vietnamese students will get more advantages in going study in Singapore; its also a chance for us to increase educational quality. 1.3 Develop travelling Travel is an industry which has a lot of potentiality. Two countries exempt residences from visa, it create more opportunity for develop travelling. It reduces many barriers when people want to travel oversea. In addition, Singapore is the first international tourist department that opens an office in Vietnam. This thing increase amount of tourist for both countries and it contributes quite much in Vietnam GDP each year. Besides, travel is also a media to broadcast Vietnamese beautiful places as well as our tradition to foreigners. 1.4 Export & Import Singapore is an island country made up of 63 islands; its input is limited, so most of Singapore products are imported from other countries. It is a potential market for Vietnamese exporters. GDP index of Singapore stands for 47th over the world; it was $237.9 billion in 2008. And CPI index increase continuously in the last 3 years. Consumer price index (2009 = 100) Index Group ALL ITEMS Food Clothing & Footwear Weights(%) 100 22 3 Jan-10 100.8 100.3 99 7 Dec-10 104.6 102.2 99.6 Jan-11 106.3 103.1 99.2 % Change Jan 2011/ Dec-10 1.6 0.9 -0.4 Jan 2011 / Jan-10 5.5 2.8 0.2

Housing Transport Communication Education & Stationery Health care Recreation & Others All Items less accommodation Source: Statistic Department of Singapore

25 16 5 7 6 16 80

100.7 104 96.2 101.2 100.7 99.9 101.1

103.2 116.3 98.1 103.9 102.9 102.7 105.1

106 123.1 96.7 105.1 103.8 100.6 106.5

2.7 5.8 -1.4 1.1 0.8 -2 1.3

5.3 18.4 0.6 3.8 3 0.7 5.3

1.5 Creating a more competitive economic Trade increases the number of investors as well as the suppliers, domestic consumers has more chance to get high quality products. When supply increases, price will go down and customers get benefits, it also makes more competitive in domestic market. The competitions will impulse the development of whole economic. 2. Challenges: 2.1 Labor Vietnam lacks many high skill workers; it will be a problem when we want to open international market because international market requires very high quality products. Therefore, we need to improve quality of domestic workers in order to meet international standardization. Second issue is given that how to avoid brain drain. There will be talents move to Singapore because of better life standardization as well as a better salarys policy. Many people go to Singapore and they dont want to come back. It gives a big problem for Vietnamese government and private companies, how to keep high skill employees stay with companies. 2.2 Lacking of management skills As we know, the way that Vietnamese managers run their business lacks a lot of professional. Sometime they just do what they want but not what they must to do. When doing in international environment, it requires a professional management style, and the old way of management in Vietnam will create a lot of troubles in trading with foreign countries. 2.3 Different law system Singapores law follows the England law. And it does differ from Vietnamese law. Particularly the Intellectual property law is very important in Singapore and it will be penalized if someone violates it. In Vietnam, people do not attach much important to Intellectual and property law in running their business. They can meet a big trouble in Singapore if violate this kind of law. So the government should focus more in spread this law in business as well as in the population in order to adapt with international legal environment.

2.4 How to keep economic stability Opening the economy creates a lot of opportunities but it also brings many potential dangerous to our economy. Its difficult to stable domestic market when there will be many foreign investors coming and vice versa. 2.5 Maintain and develop foreign investment Although Vietnam still attracts a large amount of Singapores investment capital, total FDI in Vietnam was drop by 28% in the first nine months of 2011. Why does FDI go down too much? Vietnamese government need to find the answer and make adjustment as well as gives the suitable policies in order to maintain and attract more foreign investment into Vietnam.

IV-Policies recommendation to promote international trade. Tie up the education relationship between two countries. Vietnam knows that the intellectual standard of people determines the power of a country. Singaporean government gives Vietnamese students scholarship to go to study at Singapore. Why dont Vietnam & Singapore open some colleges and universities in Vietnam, Singaporean education system and Vietnamese students? Maybe one college or one university is enough, every year it gives birth smart people for Vietnam. Furthermore, Vietnamese workers are smart but lack of skills, government should invite more Singaporean people to train Vietnamese workers or send Vietnamese workers to Singapore to train. Give more chances and benefits for Singaporean visiting Vietnam. One Singaporean friend told me that they earned money just for travelling. Singapore is a small country, Vietnam is a large country with many beautiful landscapes. Some example policies like: give a specific amount of free tickets for Singaporean annually, reducing the process of procedure to travel Vietnam, opening more tourism agencies in Singapore, advertising Vietnamese culture in Singapore Exchanging culture takes a really important role in the relationship between Vietnam and Singapore. Vietnam is very very rich in culture diversity with more than 54 ethnic people, long history while Singapore is not quite rich in culture diversity and a young country. Introducing Viet culture to Singaporean will make Singaporean people understand deeply about Vietnam. This stimulates tourism and trade (investment) between 2 countries. Thats soft power which Joseph Power referred to. Korea center, Japan foundation, Goethe institute and Hanoi LEspace in Vietnam are very precious lessons of soft power and culture influence. For instance, Vietnam government should open culture centers to introduce to Singapore, this will take positive effects in long term. Removing barriers in investment and executing world standard laws (signed agreement, intellectual property) are what Vietnam government should do in order to reduce risks for investors. Staying stable social is very important to attract investment and build up strong international trade.

CONCLUSION
Experts say two-way trade between Vietnam and Singapore is likely to grow significantly this year. Singapore is currently Vietnam's second largest customer and last year two-way trade reached $2 billion. This is likely to increase this year, as it had already reached more than $2 billion by the end of July. But the Ministry of Trade is concerned about the balance of trade, which is weighted in Singapore's favor, with Vietnam exporting goods worth a mere $518 million in the first seven months of this year. Trade experts say Singapore-invested enterprises should put more emphasis on manufacturing goods for export in an effort to improve Vietnam's somewhat lopsided trade balance with Singapore.

Members in charges: Cao Lan Phuong: Background relationship between Vietnam and Singapore. Nguyen Ngoc Hang My: The development of international trade between Vietnam & Singapore. Nguyen Hong Nhung: The opportunities and challenges. Nguyen Nhu Tuan: Policies recommendation. Tran Tam Trang: Introduction, Conclusion, Translation and Editing.

References
1. http://www.vcci.com.vn/ho-so-thi-truong/20110225024319585/iii-quan-he-viet-namsingapore.htm 2. http://thuongmai.vn/Vung-Tau-Logistics/English/international-trade/internationalmarkets/8464-singapore-interested-in-vns-potential-areas-.html 3. http://thuongmai.vn/thong-ke/kim-ngach-xuat-nhap-khau/chau-a/53597-singapore.html 4. http://www.vcci.com.vn/ho-so-thi-truong/singapore.htm#detail20110225024319585 5. http://www.vinacommodities.com/index.php?option=com_content&view=article&id=111:n hp-khu-hang-hoa-t-th-trng-singapore-nm-2010-gim-&catid=46:thong-cao-baochi&Itemid=216 6. http://www.customs.gov.vn/lists/tinhoatdong/Print.aspx?ID=18215 7. http://www.mofahcm.gov.vn/vi/tintuc_sk/tulieu/nr051205111332/nr060922102832/ns060 926060908#BKDSS4JHsJXF 8. http://www.vccinews.com/news_detail.asp?news_id=24877 9. http://www.vietpartners.com/Statistic-fdi.htm 10. http://vietnambusiness.asia/tag/vietnam-fdi-2011/ 11. http://www.bbc.co.uk/vietnamese/vietnam/2011/10/111003_vn_committed_fdi_down.sht ml

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