Rok Investors Satisfied with Economic Environment

Rok Investors Satisfied with Economic Environment

Up to 92.6 per cent of South Korean (SK) investors are satisfied with their investment decisions in Vietnam, according to recent research by the South Korea Embassy in Vietnam in coordination with the Korea Trade Investment Promotion Agency (Kotra) in Hanoi. Some 85.1 per cent of SK enterprises pinpoint Vietnam’s capable workforce as its biggest advantage in luring investment, it reported.

The March-August 2004 research of 154 SK companies tells that 69.6 per cent of investors are performing in the processing industry. Almost all SK investors pour capital into labour-intensive industries such as garment and textiles, and footwear, of which garment and textiles account for 28 per cent of total investment capital.

According to Young Woong Kim, Director General of Kortra, there are 668 SK companies operating in Hanoi, employing a minimum of around 200,000 and a maximum of 300,000 labourers. Except for agriculture, this makes up 1.5-2.2 per cent of total employment in Vietnam.

The research also reveals that total turnover of these 154 companies is US$162 million with average earnings of US$10.4 million. About 54 per cent of them export 100 per cent of their products, 10.1 per cent export over 80 per cent and 6.3 per cent export over 60 per cent. Meanwhile, 18.2 per cent sell 100 per cent of their products domestically. Investors say they are pleased with Vietnam’s policy on reducing or exempting investors from corporate income tax (100 per cent in the first four years and 50 per cent in the consecutive years). This has aided Vietnam’s investment environment to become particularly alluring to SK investors and direct foreign investment in general.

Aggregate export sales of SK-invested enterprises in Vietnam is estimated at US$2-2.33 billion, accounting for around 10 per cent of Vietnam’s total export earnings. Meanwhile, they make up 5.7 per cent or US$1.37 billion of Vietnam’s total import turnover, of which the import of materials from South Korea is US$970 million. Analysts say the import surplus is due to SK companies’ need to import materials for production, which then will be exported to third countries. Some 22.8 per cent of SK enterprises say material shortage is their major impediment in operating in Vietnam, and as a result, they tend to invest in material production.

About 55.6 per cent revealed that they were performing effectively in Vietnam with an average profit of US$960,000. When asked about the future of the business environment in Vietnam, 49.8 per cent hope that it would improve, 35.5 per cent believe that it will remain unchanged and 14.7 per cent say it will worsen due to increasing labour costs and a shortage of facilities.

“However, South Korean companies will continue to intensify their investment in Vietnam in the future,” Kim asserted.

• Kim Phuong