The Two ASEAN ‘Jewels’ in 2021
Chee Leong Lee 02.24.21
Impacted by the COVID-19 pandemic, 2020 witnessed unprecedented disruptions to unfettered human movement, supply chains, consumer demand, and even trade as a whole. This would be the same for ASEAN, a region that is deeply connected with global trade and investment as well as people-to-people interactions. While Southeast Asia has been economically impacted by the public health crisis in 2021, there is strong optimism from many quarters that ASEAN will continue to be one of the engines of economic growth in 2021. Among them, Singapore and Vietnam demonstrated the most promising economic growth in light of the various measures they implemented in response to the pandemic.
Vietnam for Wide-ranging Sectoral Investment
As the only ASEAN country in which the Asian Development Bank expected to record positive growth for 2020, Vietnam is perhaps the most successful nation to pull out from the pandemic. As of late December 2020, Vietnam’s COVID-19 situation has been effectively controlled and daily cases had been contained to single-digit ever since the second outbreak occurred in July. Even for that second outbreak, the number of cases were two-digit at best and far from the hundreds of thousands of cases reported in the U.S., India, Russia, and several other countries. Given Hanoi’s capability to contain the pandemic and resume its domestic economic activities for most of the year, it is not hard to understand why the Asian Development Bank forecasted Vietnam’s economic growth to be at 6.3% in 2021.
That said, Vietnam’s attractiveness to foreign investors spans beyond its successful COVID-19 response. For one, Hanoi’s recent ratifications of the Regional Comprehensive Economic Partnership (RCEP) and the EU-Vietnam Free Trade Agreement (EVFTA) have placed the country as the direct beneficiary for any increase of trade and investment with ASEAN’s five external partners (China, Japan, South Korea, Australia, and New Zealand) and the EU. RCEP, for example, is expected to benefit Vietnamese exporters by opening the consumer market twice the size of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). From Fitch’s analysis, improved market access to other RCEP countries will benefit Vietnam’s six export categories, namely, telecommunications, information, and communication technology, textiles, footwear, agriculture, and automobiles. Similarly, the simplification of customs procedures and rules of origin will also allow Vietnamese small-and medium-enterprises to participate in the supply chain and thus, strengthen their capabilities to move up the global value chain.
As for EVFTA, its benefits to Vietnam are tangibly expected. According to Vietnam’s Ministry of Planning and Investment, the EVFTA is bound to increase the country’s GDP by 4.6% by 2025 while its exports to the EU are expected to surge by 42.5% by the same year of projection. The industries that will benefit from the greater market access to the EU region include the manufacturing of smartphones and electronic products, agriculture (coffee), textiles, and footwear. As opposed to most ASEAN countries that do not have a free trade agreement with the EU, Vietnam’s early access to the European consumer market will be advantageous for the country in consolidating its position in the supply chain for wide-ranging industries of manufacturing, textile, and footwear. By all means, Vietnam’s active signing of free trade agreements has placed it at the forefront of regional as well as cross-region market access – a situation in which most of its ASEAN peers only managed to secure one of them and not both. This will be the main factor for Vietnam’s promising growth in 2021.
Singapore for High-Tech Investment
The other prospective ASEAN member country is Singapore. Despite the surge of cases among the migrant workers’ population from April to May, Singapore has weathered the COVID-19 pandemic relatively successfully than many of its ASEAN peers. With no locally-transmitted COVID-19 cases reported since mid-November, the island-nation is pursuing its economic re-opening by gradually lifting the Circuit Breaker (CB) measures implemented to stem the global pandemic. Unlike Vietnam, however, Singapore’s economic prospect derives from its niche positioning as a high-tech hub in the region.
As the only advanced nation in Southeast Asia, Singapore is no stranger to high-tech investments – an advantage that is boosted by the U.S.-China economic and technological rivalry since 2018. And despite this year being a challenging year for many countries, Singapore still attracted Chinese tech giants such as Tencent, Alibaba, and ByteDance, to either increase their presence in the city-state or to relocate their overseas operations to the country. ByteDance (TikTok’s owner), for instance, is investing billions of dollars in Singapore following the company’s setbacks in India, Britain, and most importantly, the U.S. At the same time, American tech conglomerate, Amazon, is also moving to a larger office space in the financial district of Singapore, a move that reaffirmed the country’s status as an irreplaceable high-tech hub in Southeast Asia.
Fast forward to 2021, Singapore is expected to receive even more high-tech investments due to its recent and past measures implemented to attract such investments. The recent Tech.Pass scheme introduced in November 2020, gave the flexibility for a foreign professional to stay in Singapore for two years in various capacities: founder or investor in tech start-ups; employee or director under local-based tech companies; and even a consultant for these companies. Such flexible work permit pass, of course, is on top of the various existing measures such as the 13 start-up schemes and grants, that have been rolled out a few years ago in the island-state. With these measures in place, Singapore is definitely an ideal destination for high-tech investors seeking to capitalise on the country’s high-tech ecosystem either for their first-time investments or business expansions in 2021.
Both Vietnam and Singapore are the two ASEAN ‘jewels’ of 2021 that investors should consider putting their bets on. At the backdrop of political uncertainty over the COVID-19 outbreak that still beleaguered several ASEAN countries, these two countries have provided an extremely stable environment for foreign investors to come and invest. As such, it is not an exaggeration to conclude that Vietnam and Singapore are well-positioned to reap the relocation of capital and talents due to the U.S.-China rivalry at both economic and technological fronts.
Chee Leong Lee is a collaborative fellow at Anbound Malaysia. Previously, he was the Taiwan fellow for the Ministry of Foreign Affairs of the Republic of China and a scholar at the Chinese Scholarship Council. Lee's primary specializations include China's sub-national diplomacy in the ASEAN region and Taiwan's soft power in Southeast Asia. Between 2016 and 2019, Lee has served as an associate fellow at the Institute of China Studies at the University of Malaya. He holds a PhD from Monash University.