"Hotspots" for Investors in Vietnam

 

Mr Sin Foong Wong, International Financial Corporation’s Country Manager in Vietnam remarked that after half a year being a full member of the WTO, Vietnam has proven to the world that it remains a quick-growing economy. Vietnam has been ready to set up a fair playing field for all businesses of any economic sector. Several laws like the Enterprise Law and Investment Law help resolve difficulties for investors and basically satisfy WTO commitments.

An annual survey result released at the forum by Jana External Trade Organisation (Jetro) showed that investment cost in Vietnam was lower than in other countries. Especially, up to 60 per cent of Japanese companies doing business in Vietnam think costs in the country are lower than in China - the largest rival location for Japanese production companies in ASEAN region.

Jetro said Vietnam had made progress in lowering office leasing rates, container transportation and international telecom charges, and power bills. The result showed in the 82.4 per cent of Japanese companies in Vietnam planning to expand investment, while new Japanese investors also want to move production assets from China or extend their production to a third country. Investors rated Vietnam one of the two best destinations in Asia.

 

Co-chairman of Vietnam Business Forum and Acting Director of the World Bank in Vietnam Mr Martin Rama affirmed, “Vietnam has had much success in its economic development and has been recognised by the international community, but as it is integrated more deeply into the global economy, Vietnam will have to solve more difficult issues.”

First, investors are especially concerned about human resource development. This is a “hotspot” affecting FDI capital attraction in Vietnam.

Mr Alain Cany, Chairman of the European Chamber of Commerce (EuroCham) in Vietnam, analysed that the shortage of high-quality human resources and the rapid salary inflation has forced many companies to seek and recruit employees from other ASEAN nations. This could potentially cause instability of Vietnam’s business environment. Mr Alain said EuroCham pledged to be a “locomotive” to attract financial funds focusing on human resources, education and training in Vietnam.

One of the current burning issues investors worry about is the difficulty in finding qualified employees. Mr Andrew Curric, Chairman of Australian Chamber of Commerce and Industry (Auscham) in Vietnam said, “The economic growth and new career opportunities on the labour market are positive for Vietnam, but businesses are encountering challenges in recruiting qualified employees, especially Auscham members who focus on complicated manufacturing and high-grade services.”

Auscham proposed the Vietnamese Government review the 3 per cent cap on the number of foreign employees a company can hire, because it restricts the transfer of new technology and skill sets from abroad to Vietnamese workers. Regarding this issue, the Ministry of Labour, War Invalids and Social Affairs is revising amendments to Decree 93/2005/ND-CP to resolve concerns on the foreign employee cap.

Ms. Jocelyn Tran of the American Chamber of Commerce (Amcham), also shared the above viewpoint and added that human resources are a special factor directly affecting FDI capital attraction in all aspects, whether in industry or high tech. To improve both the quantity and quality of the labour force, the Vietnamese Government should open up the door for foreign invested education units. It is also necessary to build relationships between the labourer, manager and government.

Second, Vietnam needs to quickly and effectively prevent corruption. Corruption remains an incurable disease of Vietnam, said Ms. Jocelyn Tran. Especially, when ODA capital sources for Vietnam are rising, scandals like PMU18 in the infrastructure construction field make investors worry.

The bidding process and project implementation in Vietnam are still operated under the obsolete “give and take” mechanism, especially in the public service field, Mr Rama emphasised. Bidding competition is not strong enough and many even think the competition is not real. This triggers a gap between the donors and Vietnam.

“Prevention is better than cure,” Ms. Jocelyn said about corruption. The Vietnamese Prime Minister’s signing of the “Anticorruption Action Plan for Asia-Pacific region” has, to a certain extent, calmed down investors.

The overloaded operation at seaports and the monopoly of the electrical sector are threats to FDI in Vietnam. Private sector participation in the power industry is necessary, Amcham recommended. On the other hand, the Government also needs to increase efforts to develop overland infrastructure system.