Keeping Vietnam, Thai trade eyes looking skyward

Even as free trade deals like the EU-Vietnam and Trans-Pacific Partnership (TPP) grab the headlines, the real bedrock of the Vietnam economy rests on its trade relations with neighbouring Thailand.

Mr Sanan said the Vietnam manufacturing boom is, “creating millions of good paying jobs, driving up wage growth, which in turn is pushing demand for Thai consumer products thanks to their durability, quality and highly affordable prices.”

Most importantly, he said, Vietnam has a population of roughly 94 million, with a high working age ration of 70%, which indicates strong purchasing power, particularly in the larger metropolitan areas, making it a highly lucrative retail market.

“Foreign direct investment by Thai businesses has flourished over the past few years, largely as a result of the participation of Vietnam in the much-touted TPP,” said Mr Sanan, and that trend is expected to continue in the foreseeable future.

The Thai foreign sector currently has investments in 415 business ventures in Vietnam with total equity capital of US$7.36 billion.

Major Thai projects include the recent purchase of German retailer Metro Vietnam for US$876 million by the Thai Charoen Corp as well as the acquisition of TCC subsidiary Berli Jucker of a hefty stake in the Casino Group's Big C supermarkets in Vietnam, valued at US$1.4 billion.

Earlier, in 2013, Berli Jucker bought the Family Mart convenience store chain, which then belonged to Phu Thai Group and Japanese company Family Mart, and subsequently changed its name to B's Mart.

Thai Beverage Plc through affiliated Fraser and Neave Ltd is also now the largest foreign shareholder in VinaMilk, purportedly the largest dairy company in Vietnam.  Last year, Central Group bought 49% of Nguyen Kim through its electronics retail arm Power Buy.

As of June 15 last year, Siam Cement Group reported assets with a book value of US$716 million in Vietnam, while the Charoen Pokphand Group has had a presence in Vietnam for more than a quarter of a century and now controls a commanding 20% of the US$6-billion cement market.

Mr Sanan said Thai foreign direct investment in Vietnam in 2016 is expected to be robust, taking care to point out that the outcome of the TPP will play a pivotal role in the future direction of investment in Vietnam.

I expect Thai investors will continue to pump money into Vietnam if the TPP is ratified and Thailand decides not to join it. This is because they’ll want to avail themselves of the benefits of the reduced tariffs afforded Vietnamese products shipped to other TPP member economies.

“If Thailand joins the TPP then I would anticipate investment would taper off sharply,” said Mr Sanan.

He said the TVBC academic, political and business leaders are working on ways to make the ASEAN Economic Community (AEC) more competitive. The issues range from ways to reduce regulatory barriers to improving public-private partnerships in infrastructure.

Improvements to Vietnam-Thai trade within the AEC, he said, will require close cooperation at the state, provincial and even municipal level.

Businesses and regulators need to meet regularly to reduce areas of trade friction and encourage mutual recognition of rules and processes, particularly those at border crossings to reduce unnecessary duplication of inspections and excessive paperwork.

“New global markets are important to both countries, but maintaining and growing the Vietnam-Thailand relationship is essential,” said Mr Sanan. “It’s key that we, as long established trade partners, never forget to stay focused and keep our eyes on the real prize.”