Normal trading relations between Vietnam and the United States could set the stage for increased investment in the Southeast Asian nation by Hong Kong companies, trade-development officials say.
But the size and timing of such investment is difficult to gauge and could hinge on Vietnam gaining access to garment and textile quotas.
'The impact on Hong Kong [of the US-Vietnam trade deal] would not be gigantic,' said Dickson Ho Tat-kuen, an assistant chief economist at the Trade Development Council. 'But Hong Kong, as an investor, will benefit to a certain extent. If trade flows between Vietnam and the US increase, that will substantially enhance the prospects of Vietnam as a place for foreign direct investment.' The pact would require Vietnam to begin opening its markets to US goods, services and investments while Vietnamese industries gain access to the US market at the same low tariffs given most nations. US tariffs averaging 40 per cent are expected to drop to less than 3 per cent under normal trading relations. The World Bank predicts the deal could boost Hanoi's annual export revenues by US$800 million, or about 7 per cent. That could, in turn, be good for Hong Kong's exports.
Vietnam ranks 34th among the SAR's trading partners, but trade has been shrinking due to Vietnam's economic slowdown. Bilateral trade dropped by 12 per cent last year to US$647 million and by 15 per cent in 1998 to US$737 million. In essence, the trade slump shaved US$23 million from Hong Kong's merchandise-trade surplus last year.
As the Vietnamese economy has wound down, Hong Kong companies have pulled out or mothballed their operations there. Jessie Fu Man, the TDC's Ho Chi Minh City-based director for Indochina, said the number of Hong Kong garment companies active in the country had now dwindled to about 20, from a peak of 70 in 1995 and 1996. SAR companies retreated in the face of a one-two punch, she said. Unfavourable policies by the Vietnamese government were compounded by the regional financial crisis in 1997 and 1998.
But Ms Fu said she was confident Hong Kong companies would not want to miss the new dawn.
