Vietnam: The answer to WA’s search for a new business partner in Asia!
For the past decade, China’s economic rise has cast long shadow over Western Australia’s economic engagement with Asia. Rightly so, the China GDP boom led to the mining boom, tripling Australia’s mining exports and giving prosperity measures like per capita disposable income a healthy boost.
The bad news is the Chinese economic wave may have passed, but the good news is the rest of Australia’s neighbourhood is still set for high-speed growth. By the year 2050, the Asia Development Bank estimates Asia’s share of global GDP will rise to fifty percent. Among the countries set to make the biggest gains between now and 2050 is Vietnam.
Even better news, Vietnam and Western Australia have three things working in their favour. The following three factors provide the countries with a unique point of difference, serving as a foundation for trade development and facilitate the relationships and investment needed to energise an economic partnership:
Relations between Australia and Vietnam are now at the best level ever
This is according to an headline from a Vietnamese online news outlet in January covering a visit by the Australian Senate President Scott Ryan, who met with Vietnamese Prime Minister Nguyen Xuan Phuc. Last year, Australia and Vietnam elevated their relations to the status of strategic partnership.
This kind of partnership usually sees intensification of military-to-military cooperation. However, it also incorporates an economic element as well. Engagement with Vietnam enjoys bipartisan support in Australia. Vietnam welcomes not only warships and joint training exercises, but also investment and business opportunities. This overall support and enthusiasm for Australia lays a good foundation for increased economic cooperation.
Vietnam is growing fast
The country has a population of 90 million entrepreneurial and energetic people. Their economy is growing at a rate that consulting firm PwC estimates will propel Vietnam into the world’s top twenty largest economies by 2050.
This growth was almost unthinkable thirty years ago, when Vietnam ranked among Asia’s poorest countries. In 1986, when the Vietnam Communist Party launched a program of economic reforms known as Doi Moi, the country was still reeling from decades of war. They knew they needed to try something different.
Doi Moi proved to be a game-changer, phasing out the command economy, and allowing market forced to take hold. The government started welcoming foreign investment in. Australia got in early, and was one of the first investors in Vietnam. Some of the first foreign banks and education institutions in
Vietnam were Australian.
That Australia was so important in Vietnam’s reintegration into the regional and global economy is an important foundation for their future cooperation.
The Trans-Pacific Partnership (CPTPP) offers a range of new economic opportunities for Australia and Vietnam
Some people pronounced this trade deal dead after President Donald Trump withdrew US support in 2017. It proved to be valuable even after the American exit. Countries like Vietnam, who stood to gain a lot from access to the U.S. market under the deal, nonetheless saw the TPP as a deal too valuable to abandon completely. The trade deal went into effect in December 2018 for Australia and January 2019 for Vietnam.
What does it mean for Australia and Vietnam? It means they are part of a trade bloc that has high standards for the protection of intellectual property, labour, and environmental standards. Australian investment in Vietnam now has a greater level of legal certainty than investments outside of the trade bloc.
The benefits for Vietnam are straightforward: it gets better access to the Australian market. More broadly, the deal is a tool for reforming its economy and dealing with difficult issues like the market distorting effects of State-Owned Enterprises (SOEs).
Overall, the deal provides an excellent framework for Australia-Vietnam economic cooperation. Opportunities exist for WA business interested in manufacturing, exporting agriculture products, and providing services to a country with a population three times the size of Australia. The advantages under the Trans-Pacific Partnership are there for WA’s taking.
Kyle Springer is Research Analyst at the Perth USAsia Centre, where he works on Vietnam-Australia relations and specialises in Vietnamese economic reform. He will be speaking at the upcoming Asia Business Series, hosted by the Department of Jobs, Tourism, Science and Innovation on Friday 1 March 2019.