With the deterioration of the investment environment in China, including higher wages, tighter security, and ideological control, as well as tensions between the U.S. and China, there has been a trend for foreign companies to flee China for friendlier shores, and Taiwanese firms are no exception. Due to geographical proximity and other factors, Vietnam is undoubtedly one of the ideal destinations for Taiwanese investment.
Advantages of Taiwanese investments in Vietnam
The Vietnamese government has attached great importance to its economic development in recent decades, and foreign investors, including Taiwanese companies, are welcome to invest in Vietnam.
Vietnam has signed free trade agreements with around 20 countries. With the benefit of tariff reductions, it is advantageous for Taiwanese companies to export their products from Vietnam to these countries.
Besides a stable political climate and supportive investment policies, Vietnam is currently in a period of demographic dividend, with the working-age population twice as large as the non-working-age population. The large labor force, coupled with relatively low labor and land costs, has become one of the incentives for many Taiwanese companies to relocate their manufacturing to Vietnam.
Due to the geographical proximity, Taiwanese companies can still maintain their supply chain in China after moving their production to Vietnam. In general, Taiwanese companies can transport parts and components manufactured in China’s inland cities to a seaport within 10 hours for shipment to their factories in Vietnam.
Vietnam’s geographical location is close to Taiwan, making it easy for Taiwanese companies to provide logistical support to their subsidiaries in Vietnam, such as sending key components or technicians to Vietnam.
Taiwan and Vietnam share similar cultures, traditions, and family values. It is easier for Taiwanese management to maintain good employee engagement among Vietnamese workers.
Vietnam has signed various bilateral agreements or memoranda of understanding with Taiwan, including the bilateral investment protection agreement, the double taxation avoidance agreement, the agricultural and fisheries agreement, the ATA Carnet agreement, and the memorandum of understanding on trade promotion and cooperation. It facilitates bilateral trade between the two countries and benefits Taiwanese investment in Vietnam.
Current status of Taiwanese investments in Vietnam
Although there are no diplomatic relations between Taiwan and Vietnam, the quasi-embassies of the Taipei Economic and Cultural Office (駐越南台北經濟文化辦事處) and the Vietnam Economic and Cultural Office in Taipei (駐台北越南經濟文化辦事處) were established in both countries in 1992 and 1993 respectively.
In addition, to strengthen relations between the two countries, the Vietnamese government established the Taiwan Affairs Committee in 1997, affiliated with the Office of the Prime Minister of Vietnam.
Over the past decade, Taiwanese companies have shown a growing interest in Vietnam. In the 2000s, Taiwanese investments were Vietnam’s largest source of foreign investment. While other countries have also been actively investing in Vietnam in recent years, Taiwan is still the fourth largest investor in Vietnam, after South Korea, Singapore, and Japan.
According to statistics released by Taiwan’s Bureau of Foreign Trade (BOFT), Taiwanese investment in Vietnam from 1988 to 2022 amounted to US$36.43 billion with 2,905 projects. As to the first five months of 2023, Taiwanese investment in Vietnam totaled US$779.36 million, up 43.2 percent compared to last year. It ranks fourth behind Singapore, Japan, and China.
If the investments in Vietnam made by Taiwanese enterprises based in China via a third country in the name of foreign companies were included, the actual amount of Taiwanese investment in Vietnam would be much higher.
In addition, the bilateral trade between Taiwan and Vietnam has grown steadily over the past 30 years. In 2022 alone, the bilateral trade volume reached US$27.75 billion, with an impressive annual growth rate of 24.4 percent, making Taiwan Vietnam’s fifth-largest trading partner. Taiwanese banks have also established 12 branches and one subsidiary in Vietnam.
Taiwan’s New Southbound Policy
To reduce its economic dependence on China and help Taiwanese enterprises to diversify their production to other countries, Taiwan launched the New Southbound Policy on September 5, 2016. The initiative also aims to strengthen cooperation and exchanges between Taiwan and other Southeast Asia, South Asia, and Australasia countries, including Vietnam.
As Vietnam is a rising star in ASEAN and one of Southeast Asia’s most popular destinations for foreign investment, the Taiwanese government has actively encouraged Taiwanese companies to venture into Vietnam under this Southbound Policy.
To this end, the Taiwan Stock Exchange (TWSE) chairman, Sherman Lin (林修銘), led a delegation to visit Vietnam in June 2023. TWSE also plans to open its first overseas office in Vietnam to serve Taiwanese companies and foreign investors.
A recent seminar promoting Taiwanese investment in Vietnam
To promote the first Taiwan Industry Chain Industrial Park (TICP) in Vietnam’s Xing’an Province (Tỉnh Hưng Yên), a seminar was held in Taipei on June 29, 2023.
Sponsored by Vietnam-Taiwan Business Association (the Association), the seminar was attended by dozens of Taiwanese entrepreneurs, a delegation from Vietnam, Qin Jia Hong, Taiwan’s National Policy Advisor to the President, Vu Tien Dung, Ambassador (Director) of Vietnam Economic and Cultural Office in Taipei, Wu Pinzhen, Chairwoman of the Association, and some TICP executives.
Witnessed by Ambassador Vu Tien Dung, Advisor Qin Jia Hong, Chairwoman Wu Pinzhen, Representative of Vietnam’s Xing An Province, and Jeff Chen, ITC Director of the Association, four Taiwanese companies signed the letter of intent to invest in the first Taiwan Industry Chain Industrial Park in Vietnam.
The first phase of TICP has a planned area of 193 hectares (477 acres). Around 30 manufacturers are expected to occupy the first phase, and seven Taiwanese companies have decided to move in. The second phase will cover 317 hectares (783 acres), with 70 hectares (173 acres) designated for establishing an environmental protection zone for the electroplating industry.
In conclusion, with supportive policies from both countries, Taiwanese investment in Vietnam will increase, which in turn will contribute to Vietnam’s economic development and Taiwan-Vietnam bilateral relations.
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