Vietnam and Indonesia beefing up investment ties

Vietnam and Indonesia are working together to expand their investment and trade cooperation, with both nations set to venture into new projects.
Many investors like Gojek are expanding operations in Vietnam
Many investors like Gojek are expanding operations in Vietnam

Vietnamese President Nguyen Xuan Phuc and his Indonesian counterpart Joko Widodo on December 22 affirmed their strong commitment to elevate their investment ties via a series of new solutions including facilitation of enterprises to diversify investment and business forms in their respective markets, including in new sectors such as digital economy, digital transformation, green economy, and renewable energy.

“Vietnam continues to be an attractive destination for foreign enterprises. Vietnam’s position is considered strategic for the enhancement of mutually beneficial economic cooperation,” Denny Abdi, Indonesian Ambassador to Vietnam, said.

He said that Vietnam can serve as an entry point for Indonesian investors to the 98 million people of the country’s domestic market as well as entrance to surrounding ASEAN countries such as Laos and Cambodia by utilising tariff preferences in ASEAN; and to Vietnam’s third-largest trading partner countries such as the US, EU, Eurasian Economic Union, and China as Vietnam’s trade relations with these countries are significant and increasing.

“Indonesia and Vietnam share several conditions that can support in enhancing the economic relationship, among others are huge population, increasing economic achievements, rising purchasing power parity, geographical closeness, ASEAN member countries,” Ambassador Abdi said.

Amplifying investment

According to Vietnam’s Ministry of Planning and Investment, as of November 20, Vietnam had 105 valid investment projects by Indonesian companies registered at 638.8 million USD. Vietnam also has 17 valid investment projects registered at 59 million USD in Indonesia, operating in commerce, IT, agriculture, and industry.

Two weeks ago, 12 Indonesian companies came to Vietnam to showcase products in medical equipment and devices, hospital beds, food supplements, and herbal medicines. They also want to work with Vietnamese partners in potential projects, according to the embassy.

These companies include namely Citra Westlake City Development Co., Ltd; Thang Long Cement Joint Stock Company – Semen Indonesia Group; Japfa Comfeed Vietnam Co., Ltd; PT. Mitra Aviasi Perkasa (MAP); Dexa Medica Vietnam; PT. Trimitra Baterai Perkasa, PT. Niramas Utama (INACO), We Link., Co., Ltd; PS Distribution (Orang Tua Group), United Family Food Vietnam Co., Ltd; Magnetar Global International Vietnam Co., Ltd (Kokola Group), and PT Pacific Food Indonesia.

In another case, Indonesia’s mobile on-demand platform Gojek has been growing from strength to strength since its inception in Vietnam in 2018, proving its strong position as a growth partner for drivers and merchants.

In Vietnam, Gojek has made significant progress and impact since its entry into the market in 2018. It now offers four services in Ho Chi Minh City and Hanoi – GoRide (two-wheel ride-hailing), GoCar (car ride-hailing), GoFood (online food delivery), and GoSend (package delivery) – all of which help to make life easier for consumers while improving income opportunities for its driver-partners and small restaurants and eateries.

“Gojek’s digital ecosystem is built to support individuals and entrepreneurs, helping them to thrive in all circumstances, so giving assistance to our merchant partners and micro, small, and medium-sized businesses has always been one of our key priorities,” said Duc Phung, country general manager of Gojek Vietnam.

According to the Indonesian Embassy to Vietnam, many Indonesian businesses are targeting Vietnam as an attractive business and investment location. They are operating in many sectors such as coal, education, automobile components, infrastructure, property, consumer products, agriculture, and plastic moulding. Many Indonesian companies have been successfully operating in Vietnam, including Thang Long Cement, Citra Westlake City Development Co., Ltd. (Ciputra Group), Dynaplast Vietnam, Japfa Comfeed, Akebono Brake Astra Vietnam, and Vietmindo Energitama.

“Indonesian investors are very interested in infrastructure and property sector. The Vietnamese government is also seriously undertaking promotional activities to attract foreign investors in the development of the property sector by facilitating the construction of facilities and infrastructure, allocation of land and stabilisation of land prices, and especially improving the transparency and simplification of administrative procedures,” Ambassador Abdi said. “Development of the property sector is crucial to the Vietnamese economy following the agro-industrial and service sectors. Ciputra Group in Hanoi pioneered investment in the property sector including industry, real estate and apartments, and the opportunities are still open for investors from Indonesia.”

Indonesia’s coal miner Intra Asia Indonesia is reported to be working with Vietnamese authorised agencies about a plan to construct a 1 billion USD coal port in Vietnam’s central region. A few years ago this group inked an MoU on forging co-operation in coal trading and seaport investment with a Vietnamese partner - Hong Phat Group. The delay in implementation of this project is ascribed to some difficulties in procedures.

The port, whose designed capacity is about 15-20 million tonnes of coal per year, will be largely earmarked for cargo and logistics that will serve export and import between Indonesia and Vietnam, especially coal.

Intra Asia Indonesia currently operates three coal mines in Indonesia, and also a corporate coal trader.

In another case, Indonesian animal feed producer Japfa Comfeed Vietnam is expected to continue investing in Vietnam. In late 2020, the company was licensed to invest more than 40 million USD into an animal livestock production project worth 230 million USD in the southern province of Binh Phuoc.

Besides this project, Japfa Comfeed Vietnam also cooperates with the world’s leading companies in breed genetic technology, building and developing a system of breeding farms for great-grandparents, grandparents, and parents to create breeding sources suitable for local conditions with competitive price at Binh Phuoc with the number of employees by 2025 set to be over 1,000.

Arif Widjaja, general director of Japfa Comfeed Vietnam, said, “This 230 million USD project demonstrates our long-term commitment in business and investment in Vietnam. Being one of Japfa’s three key markets in Asia, Vietnam is always our prime priority in the group’s expansion strategy.”

Nearly two weeks ago, Japfa Vietnam officially put into operation the Poultry Hatchery in the Central Highlands province of Dak Lak. This is the fourth factory and one of the most modern projects of Japfa in Vietnam. The other three are located in Thai Binh, Binh Duong and Dong Nai provinces.

According to the Consulate General of Indonesia, there are more than 40 Indonesian companies in Vietnam, and most are located in the southern region. The sectors range from spare parts, manufacturing products, fast-moving consumer goods, chemicals, plastic and aluminium, pharmaceuticals, and cosmetics to transportation, travel, and logistics. These companies produce goods and services for the Vietnamese market, as well as for exports. Some of them are growing well and contributing significantly to Vietnam’s economic growth for their business and creating employment for the Vietnamese people.

“As one of the fastest-growing economies in the region, driven by export-oriented manufacturing, foreign direct investment, and increasingly strong domestic demand, Vietnam is attracting the attention of investors in the whole world. Vietnam has become a strategic place for many foreign entrepreneurs to invest and set up a company,” the Consulate General said. “Despite the disruptions due to the pandemic, many Indonesian companies are still eager to expand their footprint in Vietnam, primarily through mergers and acquisitions.”

Expanding trade

Both countries’ bilateral trade turnover soared from 5.6 billion USD in 2014 to 11.5 billion USD last year - up 40% against 2020, exceeding the target of 10 billion USD set in their 2019-2023 action plan. The figure sat at nearly 13 billion USD in the first 11 months of 2022.

Both sides have set a target that the figure will rise to over 25 billion USD a year before 2028.

“Over the past five years, there has been an increase in trade by 9.77%. Therefore, we have agreed to set a new bilateral trade target of 15 billion USD by 2028,” stated President Joko Widodo.

He noted that a number of aspects related to bilateral cooperation were discussed by him and Vietnamese President Nguyen Xuan Phuc, particularly in relation to trade. A trade goal of USD 10 billion in 2023 had been exceeded earlier from the targeted time, with 11.06 billion USD generated in 2021.

President Phuc also noted that Indonesia was now the third-largest trading partner of Vietnam in ASEAN.

“This cooperation is important for both nations to improve defense, security, and maritime affairs, as well as intensify cooperation in energy, tourism, education, and people-to-people relations aspects,” he stressed.