United Overseas Bank (UOB) is “committed” to Vietnam for the long term, says the bank’s deputy chairman and CEO Wee Ee Cheong.
“For more than 30 years, the UOB Group have remained steadfast in serving our clients in Vietnam,” says Wee, who spoke to the over 600 guests at the bank’s Gateway to Asean conference in Ho Chi Minh City, Vietnam on Sept 6. This is the third year that the bank has held this conference.
He adds that the bank was the first Singapore bank to establish a presence in the country in 1993. Back then, the bank had three employees compared to the over 1,400 employees and five branches that it has in Ho Chi Minh City and Hanoi. In July 2017, UOB became the first Singapore bank to receive an in-principle foreign-owned subsidiary bank (FOSB) licence from the State Bank of Vietnam. The FOSB licence allowed the bank to expand its network of branches beyond Ho Chi Minh City, enabling it to provide its products and financial solutions to businesses and consumers in other cities across Vietnam. UOB remains the only Singapore bank in the country to own the FOSB licence.
“Vietnam has been one of the fastest-growing economies in Southeast Asia (SEA) with promising potential,” says Wee. “The macro fundamentals are favourable [with Vietnam’s] young population, skilled workers and abundant natural resources.”
“It is a beneficiary of global supply chain shifts and free trade pacts,” he adds. Furthermore, foreign direct investments (FDIs) into Vietnam have been “robust”, hitting record levels.
Year-to-date (ytd) July, FDI inflows to the country remained strong at US$12.6 billion ($16.36 billion). So far, Singapore remains the top source of FDI inflows to Vietnam followed by Hong Kong and Japan. In 2023, Vietnam attracted a total of US$23.2 billion in FDI flows while 2022 saw US$22.4 billion in FDI inflows.
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Over the past four years, the companies supported by UOB have pledged to invest around $42 billion in Asean. This will translate to creating over 200,000 job opportunities in the various markets, says Wee.
In Vietnam, UOB has supported about 300 companies to expand into the country over the past five years.
“These companies have pledged to invest about $7.3 billion and create about 50,000 jobs here,” he adds, citing an example of a private healthcare provider in Asia that sought to acquire a majority interest in a local hospital in Vietnam. The private healthcare provider is believed to be Thomson Medical Group A50 , which completed its acquisition of FV Hospital in January this year.
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“Our offices across markets worked together to provide banking services including account opening and banker’s guarantee issuance for different stages of the acquisition,” says Wee.
Asean should remain ‘conducive and competitive’ on global stage: UOB Vietnam CEO
As more businesses look to SEA for expansion, it is “crucial” to ensure that the region remains conducive and competitive on the global stage, says Victor Ngo, CEO of UOB Vietnam.
Ngo made these remarks in his opening speech at the same conference.
This year’s theme, “Asean: Crossroad to the world” captures the “immense potential” that the region has ahead, Ngo notes.
Despite the geopolitical tensions, hyper inflationary environment, supply chain disruptions and moderated global demand that emerged after the Covid-19 pandemic, the Asean economy has remained resilient, he adds.
To be sure, the region is tipped to grow by 5% this year.
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Within Asean, Ngo highlights Vietnam’s “dynamic development and strategic position” in the region and its contribution to the region’s economy.
“As Vietnam gains global attention and serves as a gateway to Asean, I’m pleased we’re hosting the conference in this thriving market this year,” says Ngo.
According to Suan Teck Kin, UOB’s head of research, Vietnam may see better prospects in 2024 even though momentum is tipped to slow down in the second half of the year. With that, the bank estimates Vietnam’s GDP to grow by a “conservative” 6% this year, which is at the lower end of the official forecast range of 6.0% to 6.5%. During a briefing to the media on Aug 28, Suan says there may be a “good chance” that Vietnam’s GDP may grow by 6.5% in 2024 instead, but that depends on the numbers released for the 3Q2024.
“The outlook [seems] quite positive this year,” he adds.
Factors that make Vietnam an attractive spot for businesses
During one of the breakout sessions at the conference, Li Fan, managing director, Warburg Pincus, Singapore stressed that Vietnam’s pro-business environment, its strong partner network and secular tailwind “makes sense” for organisations looking to invest in the country.
Vietnam has been doing a “decent” job to cultivate a pro-business environment, says Fan.
“If you look at all the emerging markets, not just in Asia, but even globally, arguably, I would say Vietnam has been the only country that has been following the East Asian growth model,” he shares, adding that the model is a “highly successful one”, which saw the growths of countries like China, South Korea, Japan and Singapore.
After the Covid-19 pandemic, the Vietnamese government has been doing steps to attract more investors by signing international free-trade agreements (FTAs) and fostering partnerships comprehensive strategic partnerships with multiple countries.
“These are very important initiatives which gives manufacturers a lot assurance that coming to Vietnam, they get to enjoy a foundation or a baseline of country-to-country relationships no other countries have,” Fan says. “So far, Vietnam has 18 of these [FTAs]. Ten years ago, it had seven.”
On secular tailwinds, Fan notes that labour costs in Vietnam is half of China’s even though costs in the former have been growing steadily in the last five years. Vietnam’s proximity to China is also an “overlooked element” when people talk about the China+1 strategy.
“Vietnam is arguably the only country that has a direct borderline with China and it’s suitable for Chinese manufacturer businesses to move out of the country,” he adds. “If you drive today from places like Shenzhen to Hanoi, it takes about 16 hours, which means that if a manufacturer… somehow finds that the supply chain still needs an upgrade or work… the easiest choice is for them drive back to China and get [whatever they need] themselves.”
The China+1 strategy, or “China+n” strategy as William Fung coins it, is a “major” shift because the supply chains have been well-established for the last 10, 20 years from China. Now we have to all be rewired. Fung is the group deputy chairman of the Hong Kong-based Fung Group of companies and group chairman of Li & Fung Limited.
Rewiring the supply chain adds Fung, requires a “totally different mindset”. “It is a reinvention of the business model. It is a reinvention of the way that used to be done between some very major trading nations… but on the other hand, there is a lot of opportunity. I think the opportunity falls in this region.”
“For the industrialists relocating from China, Asean is the obvious stop. [It] has begun not only [quickly], but also in a way that is going to be very beneficial to the host countries,” he adds.
In his speech, Wee also noted that the bank sees three connectors powering the continued growth of Asean.
One such connector is the region’s government’s policies facilitating cross-border businesses. A decentralised supply chain that promotes trade, as well as industries driving the green economy, are the two other connectors that were named.
Shares in UOB closed 27 cents lower or 0.85% down at $31.46 on Sept 6.
