A state visit to Vietnam by outgoing US president Barack Obama last month made global headlines, particularly when a deal was thrashed out that allows the socialist republic running the South East Asian country to buy arms from a government with whom it was at war just over 40 years ago.
Mr Obama’s visit was aimed at gaining support for the Trans-Pacific Partnership, a trade agreement involving 12 Asian countries as well as the United States and the European Union. Estimates of the effect of this deal on Vietnam’s GDP vary from 8 per cent to about 30 per cent, and the consultancy Solidiance suggests it could add about US$68 billion to its export base by 2025. Last year, Vietnamese exports stood at $162bn.
Perhaps less well reported, but still potentially of significant trade benefit to Vietnam, was a visit two weeks earlier by Foreign Minister Sheikh Abdullah bin Zayed, which coincided with a business forum aimed at promoting trade.
Pham Binh Dam, Vietnam’s ambassador to the UAE, described the visit as “quite a significant event that marked a new step forward in bilateral relationships”.
Bilateral trade between Vietnam and the UAE increased by 27 per cent to $6.1bn last year, and on top of this, another $5bn came through various UAE free-trade zones. Mr Pham expects bilateral trade to grow by a further 15 per cent this year to $7bn, and to hit $11bn by 2020.
Vietnam’s GDP growth in recent years has ranged between 5 and 8 per cent, but is expected to increase to 6.5 per cent this year, up from 6.2 per cent last year.
The bulk of bilateral trade that took place between the UAE and Vietnam last year – $5.7bn of the $6.1bn – came as a result of Vietnamese exports to the UAE, and Mr Pham said the trade relationship was largely complementary, with little competition between sectors.
The biggest category for UAE imports was mobile phones, because South Korean manufacturer Samsung makes about half of its handsets in Vietnam. Clothing and footwear is another major category, with brands such as Nike, Adidas and North Face having manufacturing bases in the country.
Agriculture was responsible for about $34bn of Vietnam’s exports last year, and the UAE imported produce worth about $250 million, including pepper worth $100m, rice worth $30m and $25m of coffee.
Mr Pham said that a new Emirates service from Dubai to Hanoi due to get under way in August – that adds to the 14 flights a week the carrier operates to Ho Chi Minh City – opens up the potential for the import of more exotic fruits by air freight, such as dragon fruit, mangoes and langon.
In April, a group of 20 agricultural and food service companies came to the UAE to promote Vietnamese produce through a series of meetings with buyers, and an initiative with local supermarket chain Choithrams. Following this, Vietnam’s labour ministry held a seminar in May where manpower service firms also met potential recruiters.
At that event, Hassan Rajab, the owner of Dubai-based Easy Jobs Consultants, signed a deal to recruit Vietnamese staff from Hanoi-based IDC Employment Agency.
Nguyen Phi Hung, the general director of IDC Employment Agency, said he had been recruiting Vietnamese workers for the UAE for more than 10 years, mainly for the construction sector. However, a combination of the downturn in the UAE following the global financial crisis and the subsequent strengthening of the Vietnamese economy has meant the number of Vietnamese workers in Dubai has fallen.
Do Minh Anh, the labour attaché to Vietnam’s embassy in the UAE, said: “Before the financial crisis in 2008, we had more than 20,000 Vietnamese workers here. They worked on projects like Palm Jumeirah, Burj Khalifa and Dubai Metro. In Abu Dhabi, they worked on many skyscrapers in Reem Island.”
The number of Vietnamese workers currently in the UAE has dropped back to about 6,000, largely because manual workers can earn the same salaries at home. Vietnamese labour suppliers are, therefore, looking to bring in more skilled construction tradespeople such as welders, fabricators and pipe fitters, as well as more nurses and staff serving the hospitality sector.
Mr Rajab said that following his deal with IDC, which will extensively train staff in English and arrange for Skype interviews to be conducted before employers agree to issue visas, he will target hoteliers looking to recruit staff, who are generally paid a basic wage of about $400 (or Dh1,200) a month. “They [the Vietnamese] are very hard workers and a pure people. It’s not only about salary. It’s a type of life – we provide accommodation for them and transportation.
“Second, this is a first chance for any candidate. All of us who came here started small and developed our life and skills over time.”
Mr Pham said that trade meant more than simply the supply of goods or people from Vietnam.
He pointed to the fact that increasing affluence has meant tourism numbers from Vietnam to the UAE have boomed in recent years, from just 500 in 2013, to 1,200 in 2014 and 25,000 last year.
Saleem Sharif, the deputy managing director of ATS Travel in Dubai, said it has been hosting 16-strong tour parties from Vietnam for the past 15 months, with an average of five tours taking place at once. On average, he says, groups stay for five nights, four of which are spent in Dubai and one in Abu Dhabi.
“We have also handled a few incentive trips from multinational corporations based in Vietnam,” he said.
“These group sizes were in the range of 50 to 180 [people].”
Mr Pham also said that some of the greatest opportunities for UAE companies lay in investment in property and hospitality projects in Vietnam.
“In tourism, we welcome about 8 million tourists per year, which is far too low given the beauty of the country, the cultural diversity and the historical richness,” Mr Pham said. “That’s the area where the UAE has an advantage – they have the capital [and] they have the expertise that developed in this country. They turned the desert into a tourist haven in such a short period of time. Now, if they want to maximise their profit then they should export this to other countries,” he said.
Steps are already being taken in this field, with a number of UAE developers eyeing prospects in Vietnam. Limitless, the sister company of Dubai developer Nakheel, restarted a $550m mixed-use project known as Halong Star overlooking the Unesco World Heritage site at Halong Bay in March.
In December, a joint venture between Emaar Properties and Vietnamese developer Bitexco gained approval to develop a $1.34bn mixed-use project covering 427 hectares to the eastern side of Ho Chi Minh City, Vietnam’s most populous city.
Mr Pham hopes the involvement of UAE developers will not only bring development and tourism experience to Vietnam, but also visitors and investors.
“The number of Arab tourists in Vietnam remains very low, and because of that low starting point the [potential] margin is huge,” he said.
Yet there are both pros and cons when it comes to investing in Vietnam’s property market. For a start, returns have been unsteady in recent years, with prices largely slumping between 2010 and 2013, before recovering from mid-2014 onwards.
Dung Duong, a director of research and consulting at CBRE in Vietnam, said market confidence had been hit as a result of a number of uncertainties, including high inflation and interest rates.
“Buyers were sitting on the sideline and adopted a wait-and-see attitude during this period,” she said.
“Since the beginning of 2014, the market started to show a pick up, with improvement in number of new supply, take-up, selling prices and rent.
“People have seen more government involvement with stimulus packages, legislation and funding for housing being embraced.”
Ms Dung said that infrastructure development in major cities, most notably Ho Chi Minh City and Hanoi, where metro systems are being developed, is adding to the attractiveness of house buying, as is the rapidly urbanising population.
Figures from JLL for the first quarter this year show that prices for completed apartments were up by 7.7 per cent year on year, with apartments and villas up by 4.1 per cent in the same period.
Yet property investment in Vietnam remains a risky business, and is much more restrictive for foreigners. Even after a recent liberalisation, properties are generally only available on 50-year leaseholds and foreigners are restricted from owning any more than 30 per cent of a single apartment complex, or no more than 250 units within a single administrative region.
Moreover, David Jackson, the general director of Colliers in Vietnam, said that although there were rules governing the delivery of projects on time, in practice they have not been enforced and buyers have had little or no recourse once payments have been handed over.
“This is an emerging market, having high risks but also high returns,” he said. “Lack of transparency, corruption [and] bureaucracy are pressing issues. Investors need to seek legal advice before engaging in any investment.”
Outside of property, Mr Pham said opportunities were available for investors in infrastructure, with project financing required for investment in roads, bridges, ports and airports, among others. He also believes that UAE expertise in renewable energy, particularly in solar schemes, could be put to use as project sponsors or developers in Vietnam.
Mr Pham also called for more frequent business forums to be held between UAE and Vietnamese companies, and said he hoped a state visit could be conducted at the prime ministerial level between the two countries soon.
“I would like to receive stronger actions and cooperation from authorities in both countries, because there is such huge, untapped potential. I identify myself as a pro-business ambassador, and this embassy as a pro-business embassy.”
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