Vietnam offers significant prospects for collaboration with Australia
Vietnam’s effective management of COVID-19
By Elise Giles, Capability Development Manager, Asialink Business
4 July 2020: According to official figures, Vietnam has recorded zero COVID-19 deaths. Despite a population of 97 million people, and a shared border with China, this is a remarkable feat. As former Australian Ambassador to Vietnam John McCarthy has said, “no country in Asia - and arguably in the world - has managed the COVID-19 pandemic as well as Vietnam”.
The country took swift action in tightening border controls and imposed large-scale quarantines, including the closing of schools, businesses and other services immediately following the Lunar New Year holidays in late January (also known as ‘Tet’). There were many creative responses developed to aid containment efforts, including a catchy coronavirus video which went viral.
Being one of the first countries in the world to re-open post-COVID-19 with few restrictions, Vietnam has enabled investment flows to continue with companies like Apple diversifying its manufacturing footprint with operations in Vietnam, joining other global brands such as Samsung and Nintendo. Much of this investment has been driven by efforts to diversify supply chains and move investment from China. While Vietnam’s Foreign Direct Investment has been growing strongly for the past few years, not surprisingly it did decline during the January-June 2020 period.
Despite this, the World Bank predicts economic growth of around three to four per cent for Vietnam in 2020, which is widely expected to continue to be one of the fastest growing economies in Asia. From a regional outlook, ASEAN as a collective is recognised as the fifth largest economy in the world, and latest speculations indicate Vietnam as the only nation out of the 10 to maintain moderate growth in 2020.
The ongoing growth prospects in Vietnam present real opportunities for Australian businesses in the post-COVID-19 recovery phase.
How Vietnam is leveraging the bilateral relationship to enhance its manufacturing capabilities
The collaboration between Australia and Vietnam will be important to both nations’ future prosperity. Vingroup’s, ambitious automobile start-up ‘VINFAST’, is a great example of the growing economic linkages.
Vingroup, Vietnam’s largest conglomerate with assets valued up to $35 billion, launched its auto manufacturing business, VINFAST in 2018 with a substantive investment of USD$1.3 billion as of the first quarter of 2019. It is estimated VINFAST’s operations have the capability of producing 250,000 vehicles and 300,000 electric motorcycles per year.
Image credit: Manufacturing underway at the VINFAST factory in Hai Phong. Photo: VINFAST
Notwithstanding the global pandemic, VINFAST opened a new research and development office in Australia in June 2020 - the start-up’s first expansion outside Vietnam.
One of the reasons for VINFAST’s decision to enter the Australian market was to capitalise on our strong talent and expertise. The Australian office will assist the Vietnamese start-up with product development for its future vehicle models, as well as strengthen its capabilities in engineering and manufacturing.
Jim DeLuca, Deputy CEO of Vingroup, described his Australian colleagues as a “critical part of our family who are contributing to the success of the company”.
VINFAST has also identified Australia as a potential future retail market for its automobiles, given the local supply chain and maturity of the Australian automobile market. This investment signifies its strong ambitions to become a global vehicle brand.
With the end of local manufacturing by international car manufacturers including Holden, Ford and Toyota, Australian consumers could perhaps in the future see the presence of this Vietnamese brand on our roads.
Remarkably, during COVID-19, Vingroup contributed to fight the country’s battle against COVID-19 and signed an agreement with Medtronic – an American medical device company – to produce 55,000 ventilators a month at its Vietnamese factories, including at its new plant in Hai Phong, which is normally used for the production of VINFAST vehicles.
Despite the innovative pivot to ventilator production, VINFAST is on track to sell its Vietnamese vehicles to the world, with an ambitious plan to export electric vehicles to the US by 2022.
Image credit: One of VINFAST’s first concept cars at the Paris Motor Show 2018. Photo: VINFAST
Opportunities for Australian business
The VINFAST case study signifies the swift action and level of innovation Vietnamese companies are taking to pursue opportunities, notwithstanding the challenging economic climate.
Collaboration between Australia and Vietnam is important to our shared futures, and Australian businesses should consider the many opportunities across a wide range of sectors with Vietnam, including in manufacturing, education, agribusiness, and information technology. Successful Australian organisations including SunRice and RMIT are two Australian household names already investing in Vietnam.
For example, SunRice Group accounts for over five per cent of Vietnam’s rice exports, supported by its expansion in acquiring a rice processing mill in 2018 and its commitment to working together with provincial governments to build sustainable practices and new rice varieties. While this year RMIT University celebrates its 20th anniversary in Vietnam, and its success is evident in its recognition as the world’s largest offshore branch campus.
To capitalise on these opportunities Australian businesses, need to build their Asia capability. Australian businesses face the ongoing challenge of maintaining and developing commercial opportunities and relationships in Asia in a virtual environment, given the current lack of international travel and little face-to-face interaction.
Building cultural capability will maximise the possibility of business success in Asia for those individuals and organisations who take the time to build it. And it is these Asia capabilities that will be essential to the future of our workforce.