Globalization: A Comparison of Foreign Investment in Vietnam and Singapore

This article compares the costs, benefits, and risks of foreign investment in Vietnam and Singapore. It explores the political economy, system, and stability of both countries. The Investment Law of 2014 in Vietnam introduces opportunities for FDI in 267 sectors, while Singapore has a better financial structure and lucrative tourist market. However, Vietnam has a high level of corruption and a weak judiciary system, while Singapore has a high range of taxation and non-internationalisation of the Singaporean dollar.

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Political economy
Political system Vietnam Singapore
Costs - the Investment Law
was enacted in 2014
- restrictions on specific
sectors like dealing
with drugs, chemicals
or minerals, human
trafficking, outbound
services to the travel
agents and in sales and
marketing of the air
product services and
computer reservations
- one of the leading
countries in terms of
business environment
- ranked the eight
biggest recipients of
FDI inflow in a global
scale in the year 2017
Risks - high level of
corruption
- judiciary system is
subject to the political
influence
- financial establishment
is not strong enough
- commercial cases takes
long years to be
- high range of taxation
- non-
internationalisation of
the Singaporean dollar

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resolved
Benefits - Investment Law of
2014 introduces
opportunities for FDI
in 267 sectors
- socio-political stability
- government initiatives
to liberalise the
economy
- better transaction
transparency and
shareholders power
- more than 15,000
foreign MNCs and
SMEs
- the primary invested
sector is the financial
and insurance industry
- the protection of the
investors index of
Singapore is quite high
Vietnam
Costs
The Vietnam government has set some regulations regarding the Foreign Direct
Investment (FDI) with the aim to develop the economy of the country in a rapid pace (Hill et al.,
2016). In this regard, the Investment Law was enacted in 2014 that allows the foreign investors
to visit in the country (Vietnam News, 2017).
However, there are some restrictions that the Vietnamese authority has implemented on
specific sectors like dealing with drugs, chemicals or minerals, human trafficking, outbound

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services to the travel agents and in sales and marketing of the air product services and computer
reservations (Foreign direct investment projects licensed in period 1988 - 2016., 2018).
Benefits
It can be argued that the Investment Law of 2014 introduces opportunities for FDI in 267
sectors on the basis on ensuring amount of capital, ownership percentage and the investment
forms as prescribed by the domestic laws (Vietnam News, 2017). Therefore, the country has
some strong points that can attract the foreign investors to take an interest in initiating their
business in Vietnam.
The socio-political stability of the country facilitates a good environment for business. In
addition to this, the government initiatives to liberalise the economy and the steady growth with
a positive economic prospect lead the country towards a glowing future (Hill et al., 2016).
Moreover, in terms of transaction transparency and shareholders power, Vietnam stands
far better in compare to United States as well (Vietnam News, 2017, 2017).
Risks
Despite of having a good prospect in FDI, Vietnam does not have enough FDI projects in
compare to other Asian Countries. It increases needs to clearly investigate low numbers of FDI.
A possible cause for this can be high level of corruption.
The judiciary system is subject to the political influence and as a result of that the
commercial cases takes long years to be resolved (Vietnam News, 2017).

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The financial establishment is not strong enough and constantly intervened by the
government which can usher a great deal of problem for the Australian private companies to do
their business independently in Vietnam (Hill et al., 2016).
Singapore
Costs
In compare to Vietnam, business in Singapore is more free and profitable due to the
better financial structure and lucrative tourist market. According to the World Bank Report in
2003, Singapore has been listed one of the leading countries in terms of business environment
(foreign-direct-investment-in-singapore., 2018).
There are a number of factors that are responsible for the ease of doing business in
Singapore. For an instance, the country has simple regulatory system, tax incentives, high quality
industrial real estate, absence of corruption and the political stability (Hill et al., 2016).
In fact, the 28th Investment Trends Monitor Report of the United Nations Conference on
Trade and Development (UNCTAD) Singapore was ranked the eight biggest recipients of FDI
inflow in a global scale in the year 2017 (Annual-Data, 2018).
Benefits
As a result of that countries like United States and Japan are constantly expanding their
business in this country and the primary invested sector is the financial and insurance industry.
Besides this, wholesale and retail, manufacturing, real estate sectors are also boosted up with the
foreign investment (Hill et al., 2016).

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According to the government website of Singapore, there are more than 15,000 foreign
MNCs and SMEs across the world setting up their base in Singapore (foreign-direct-investment-
in-singapore., 2018). Therefore, it reflects a better environment for the Australian companies to
get involved in business in the country.
Risks
However, high range of taxation and non-internationalisation of the Singaporean dollar
can create hindrance but the protection of the investors index of Singapore is quite high even far
better than US or other European nations. That is the reason why global companies are looking
for investing in the Singaporean market in an intense and robust manner.

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Reference
Foreign Direct Investment In Singapore By Country/Region (Stock As At Year-End), Annual-
Data.gov.sg. (2018). Retrieved from https://data.gov.sg/dataset/foreign-direct-investment-in-
singapore-by-country-region-stock-as-at-year-end-annual
Foreign direct investment projects licensed in period 1988 - 2016. (2018). Retrieved from
https://www.gso.gov.vn/default_en.aspx?tabid=776
foreign-direct-investment-in-singapore. (2018). Retrieved from
https://www.singstat.gov.sg/publications/trade-and-investment/foreign-direct-investment-in-
singapore
Hill, C. W. L., Hult, T. M., Wickramasekera, R., Liesch, P. W., & Mackenzie, K. (2016). Global
Business Today: Asia-Pacific Perspective, 4th Edition. McGraw-Hill Education.
Vietnam News. (2017). Foreign investment: what you need to know. Retrieved from
https://vietnamnews.vn/economy/378275/foreign-investment-what-you-need-to-
know.html#LVHUZ6tu3fTl4lLo.97
Overview. (2018). Retrieved from http://www.worldbank.org/en/country/vietnam/overview

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Appendices
Appendix1: Vietnam FDI Statistics
Source: Vietnam News, 2017
Appendix 2: Singapore FDI (Sector wise)
Source: Foreign Direct Investment In Singapore By Country/Region, 2018

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Appendix 3: Vietnam Political stability
Source: Overview, 2018
Appendix 4: Singapore political situation
Source: Overview, 2018