The results of the annual survey of Japanese companies in Asia in 2006, recently released by the Japan External Trade Organization (JETRO), showed that Vietnam will remain the best place to invest in the next 5-10 years because of low production costs. This is the consensus of 75 per cent of Japanese companies doing business in Vietnam, the highest in a single country in the survey. This reflected the satisfaction of Japanese investors in business conditions in Vietnam.
The survey was conducted in November and December 2006 with the participation of more than 1,330 Japanese production companies in 11 countries and territories in Asia, including Vietnam. The survey was only conducted in 28 main cities in 15 Asian countries in order to calculate costs for foreign investors, such as labour cost, land rental, office rental, telecom charge, public service bill, travel and taxes.
The survey said although several costs in Vietnam remained high, its medium costs were lower than regional counties. One key figure is the low labour cost. Although the monthly pay for a Vietnamese worker rose from US$120 in 2004 to US$135 in 2005, this rate was still lower than the average in surveyed countries. In Vietnam, the minimum salary rate has increased but remained low for the region. With the growth rate of 16 per cent, lower than the regional average of 28 per cent, the salary of Vietnamese workers is very competitive.
However, the salary for mid-management officials surged strongly, especially in Ho Chi Minh City. This is attributed to hardship in recruiting eligible employees. While the average rise in wages for mid-level managers was 7 per cent against that in 2005, the hike was 40 per cent in Vietnam. This is seen as one of the most uncompetitive factors in Vietnam in attracting foreign investment capital.
Other costs such as telecom charges and power bills are almost unchanged in the region as well as in Vietnam. Vietnam’s rates were lower than the regional average. Especially, telecom charges in Vietnam were much lower than those in China and Indonesia.
Electrical bills in Vietnam were also stable in the past year while they increased in other countries. The price of a kWh in Vietnam was a little lower than the regional average, but higher than in Indonesia, Malaysia and Thailand. Vietnam strived to reduce telecom charges from the above average rate in 2004 (US$1.95 versus US$1.66) to lower than the regional average (US$1.65 versus US$1.68).
Logistics services fees, such as container fees, in 2006 were closer to the regional average. This was the first time in many years that logistics charges in Vietnam came near the regional average, primarily attributed to the 30 per cent drop in fees.
However, chief representative of JETRO in Vietnam, Kenjiro Ishiwata, said supportive services in Vietnam were usually higher than its neighbours, while the quality did not meet investors’ expectation. To attract more foreign investors, competitive investment costs are necessary, but they are not enough and are not the most stable competitive factor, especially when costs in the region tend to go up. The more important issue is to create a favourable investment environment by improving the service quality of State organs and enterprises, bettering investment mechanisms such as the legal system and infrastructure, and human resources training.
Another survey showed that 82.4 per cent of Japanese companies in Vietnam planned to expand business in the country, higher than the regional average of 58.2 per cent. In the first five months of 2007 alone, the number of companies and organisations directly visiting JETRO for information about investment opportunities and Japanese business performance in Vietnam was some 70 per cent of figure from all of 2006.
The JETRO Office said as of May 2007, more than US$5.17 billion of Japanese investment capital was disbursed in Vietnam, up 7.26 per cent compared with US$4.8 billion in late 2006.
Huong Ly
Vietnamese
