The News
The News
Wednesday 28 of July 2021

Why Vietnam?

The Temple of Literature in Hanoi, Vietnam,photo: Wikipedia
The Temple of Literature in Hanoi, Vietnam,photo: Wikipedia
That kind of growth and promise is not often found in today’s global economy

Two billion dollars.

That was the sum of combined bilateral trade between Mexico and Vietnam in 2015, and with the implementation of the Association of Southeast Asian Nations (ASEAN) Free Trade Area, which went into effect on Dec. 31, creating a common market of 600,000 consumers, and the promise of the Trans-Pacific Partnership (TPP), which will encompass the region accounting for about 40 percent of all global trade, Vietnamese Ambassador to Mexico Le Linh Lan says that she expects that figure to increase even more in the next few years.

“In 2015, Vietnamese exports to Mexico more than doubled, and Mexican exports to Vietnam grew by 80 percent,” she told The News earlier this week.

“And Vietnam will soon be opening a new trade office in the Polanco neighborhood, so that should serve as an impetus for the development of new areas of commercial and economic cooperation.”

Currently, most of the commercial interchange between Vietnam and Mexico is composed of manufactured goods, including electronics and garments on Vietnam’s side and foodstuffs and beer on Mexico’s side.

But while two-way trade is definitely booming, Le admitted that, for the moment, there are no current joint-venture investment projects on either side of the Pacific.

At a geographic distance of nearly 15,000 kilometers, many Mexican entrepreneurs are understandably leery to invest in the socialist nation based on concerns of simple logistics, including language and cultural differences and a lack of mutual familiarity.

But ignoring Vietnam as a potential investment partner could be a big mistake.

While the European Union is being torn apart at the seams as a result of economic and political strife (think Greece’s collapsing economy, disputes over the flood of migrants and Brexit), and the United States is focusing inward, Mexico needs to find new trade and investment partners, and despite a recent flare-up of territorial spats, Asia is the one remaining region in the world offering both stability and growth.

Unlike the EU, which started off as a commercial bloc and has since transitioned into an unmanageable political union with too many members and too little governmental accord, the 10-member ASEAN Free Trade Area was born out of a loose political organization that has now set aside its partisan differences to focus almost entirely on trade and investment.

Founded in the 1960s, in a region that was politically torn by interstate and intrastate conflicts spurred on by the Cold War, ASEAN was conceived when the Vietnam War was at its height and after U.S. intervention in Cambodia, Laos and Myanmar.

It was an internationally imposed measure to quell unrest when Thailand and the Philippines were beset with insurgencies and Indonesia was engaged in Konfrontasi, an undeclared war with Malaysia.

Communist uprisings in the region were backed by post-revolutionary China, and Malaysia and the Philippines were squabbling over claims to Sabah, while Singapore was ruffling Malaysian feathers with its 1965 claim to independence.

But the political landscape in the region underwent a dramatic transformation following the end of the Vietnam War and the accompanying conflicts in Cambodia and Laos in 1975.

Although Southeast Asia remained divided into two political blocs — the noncommunist ASEAN and the communist Indochina with a neutral Burma (now Myanmar) — a fragile peace took hold and real regional cooperation began to take shape under the loosely structured association.

As ASEAN expended its membership, the idea of joint development through economic unity slowly began to dissolve past conflicts in favor of mutual progress and prosperity.

ASEAN today is all about business, and its members have the good sense and tragic recent memories to ensure that they keep politics out of the mix.

So what can the ASEAN bloc offer to Mexican businessmen?

Short answer: A lot.

Back in 1991, ASEAN member states accounted for just 1.7 percent of the global economy. Today, they have doubled that share to 3.5 per cent, or 6.1 percent if measured by purchasing power parity.

That kind of growth and promise is not often found in today’s global economy.

Moreover, the ASEAN region has a young and talented workforce and ample natural resources, and the International Monetary Fund (IMF) has predicted that it will represent 4 percent of the world’s Gross Domestic Product (GDP) by 2020.

And then there is the 12-nation TPP, to which both Mexico and Vietnam are ascribed and which, once it gets going, will constitute the largest trade area on Earth, with nearly 800 million consumers.

Like most other international trade agreements, the TPP will remove tariffs on goods and services and set reciprocal trade quotas, but unlike the bulk of other trade accords, it will also remove non-tariff obstacles to trade and harmonize regulations and statutes.

In the case of Vietnam, analysts predict that the TPP will add $36 billion, or 11 percent, to Hanoi’s GDP over the course of the next 10 years.

Additionally, according to a report by the Eurasia Group, the world’s largest risk consultancy corporation, Vietnamese exports could increase by 28 percent over the next decade thanks to its ample supply of inexpensive labor and growing foreign investment, particularly in the garment and footwear sectors.

Ambassador Le noted that Vietnam is also offering investors an array of incentives, including tax holidays and capital repatriation, and Hanoi is particularly interested in courting investment in the textiles, automotive parts, electronics and tourism industries, all areas where Mexican knowhow and expertise could be put to good use.

Finally, despite the geographic distance that separates Mexico and Vietnam, there is a strong and meaningful friendship between the two nations, which established bilateral diplomatic ties in May 1975, just days after the end of the Vietnam War.

“There are, of course, a lot of cultural differences between our two countries,” Le said, “but I think that our people share a lot of common values, and that is a sound basis for doing business.”