Investors are becoming more confident and satisfied with the investment climate in Vietnam. That is confirmed by the increasing foreign invested investment (FDI) and official development assistance (ODA) in Vietnam. In 2005, foreign invested projects in Vietnam registered a combined capital of US$5.8 billion, representing an increase of 38 per cent from 2004 and the largest amount since the regional financial crisis.
Foreign investment attraction includes not only capital, but also technology and management skills, therefore, Vietnam has created favourable conditions to help foreign investors further invest in key projects in important economic industries. These projects require advanced technologies and generate hi-tech products with high competitiveness in the domestic and the world market.
The National Assembly of Vietnam in 2005 ratified more than 20 laws, the largest number in one year so far. Two important laws, the common Investment Law and the unified Enterprise Law, have created a fair playing field for investors. This is aimed to satisfy the requirements of business circle and also express Vietnam's efforts in conducting international conventions.
At the Vietnam Business Forum held alongside the 2005 Consultative Group Meeting of Donors to Vietnam (CG 2005), a survey showed that the progress made by Vietnamese Government has been highly praised. More than half of the 200 firms surveyed said that hindrances to the market have been removed. 40 per cent of them said administrative procedures have been improved while 80 per cent of them expressed their intention to expand operations in Vietnam in the next five years.
Another survey conducted by the South Korean Embassy to Vietnam and the Korean Trade and Investment Promotion Agency (Kotra) in Hanoi and Ho Chi Minh City in December 2005 indicated that 62.8 per cent of Korean firms operating in the country reported making profit. More importantly, 95.2 per cent of the surveyed firms said they are satisfied with the investment environment in Vietnam, and 76.6 per cent said that an important advantage was low labour costs. They also expected that the investment environment would continue to be improved.
Despite more open and transparent policies, foreign investors still complained that Vietnam has poor infrastructure, especially in electricity, telecommunication and seaports. The government has been issuing supportive policies to encourage investment in these industries.
Under the pledged roadmap, Vietnam will open doors to sectors such as banking, telecoms, insurance, health, education and transport. This will be an important factor in attracting foreign investors. In 2006, Vietnam's telecom sector will be opened to investors following the commitments of the Vietnam-US Bilateral Trade Agreements.
Bui Quoc Viet, director of the ICPT/VNPT, said that six Vietnamese telecom firms are viewed as attractive targets for foreign investors. Some other countries are now waiting to cooperate with Vietnamese partners when the Vietnam-US Bilateral Trade Agreements come into effect.
The Vietnamese government is taking measures to boost foreign investment under the form of joint venture and cooperation to produce high-quality products for export. In 2006, acting as chairman of the Asian-Pacific Economic Cooperation (APEC) will be a milestone for Vietnam in deeper integration in the international arena. Vietnam will become an active member of ASEAN, APEC, ASEM and the World Trade Organization (WTO). This integration process will prompt foreign investment in Vietnam.
Following are ccomments of experts and economists on Vietnam’s business and investment environment
Prominence given to views of local foreign expatriate business community
Dr. Markus Cornaro-Ambassador/Head of EC Delegation to Vietnam
I am pleased to say that we look back at a very good year for reinvigorating new FDI inflows. Of the more than US$3.6 billion in new projects, the EU accounts for about USD 800 million among which there are important new investments in services and construction. There are of course many factors underlying this positive upward trend; increased investors confidence is certainly one of the reasons and it is no coincidence that European investors had been reassured by our early deal on the WTO process, and the Market access agreement of January 2005. I am also pleased to see that Vietnam managed to record a growth in textile exports to Europe despite the known constraints and tough competition, and is doing extremely well in boosting seafood exports to Europe. From our point of view, it is therefore important if we can balance this growing trade surplus in goods by gradually improving market access by European firms to Vietnam.
Vietnam must be commended for the way it handled the recent marathon package of key reforms passed by the National Assembly. In particular, it was a milestone in consultation and seeking opinions from various experts and parts of the world: not easy to amalgamate the various views, but I think that Vietnam emerged from this process in a very mature fashion. I am also happy to see that prominence was given to the views of the local foreign expatriate business community; This leaves me very confident that we are looking forward to an even better year in 2006 - first and foremost for the Vietnamese economy, but also for enhanced relations between this country and Europe."
Serious commitment from the government required for further significant gains
Ambassador of Australia to Vietnam Bill Tweddell
As Vietnam has continued to move away from a centrally-planned economy to a more market oriented economy, the Australian business community in Vietnam has witnessed a business environment that has continued to gradually improve. This is a welcome development and has in turn led to greater Australian investment interest in Vietnam. However, to sustain this performance, the Vietnamese government and the foreign and domestic business communities need to stay in close contact to further develop and refine the commercial environment for the benefit of all.
The Australian business community in Vietnam has recently raised such key issues with the Embassy as the quality of laws; the comprehensive, transparent and timely implementation of new legislation; further opening to foreign participation in key sectors; sustained efforts to stamp out corruption and protect intellectual property; and leveling the playing field between state-owned and private businesses. As the Australian business community recently noted, these efforts will not be easy, and will require serious commitment from the government, but if undertaken, they promise further significant gains in Vietnamese competitiveness, productivity, trade, growth and living standards in coming years.
Good policies and regulations must be created to secure a fair competitive environment
Mr. Hans Beil, Chief Representative of Siemens
Under the Trade Law, foreign companies can now set up branches in Vietnam to undertake certain profit making trading activities by engaging in such following business lines as exporting goods produced in Vietnam and importing certain goods for distribution in Vietnam. However, the goods foreign companies may import are limited to equipment for mining and processing of agricultural and fishery products, materials for production of medicine for people and animals, and materials for production of fertilizers and insecticides.
In addition, other trade barriers such as quantitative restrictions or tariffs are also applied at the same time. Thus, foreign companies are facing high costs of production, inflexibility, and low competitiveness. Therefore, hope that full trading rights shall be granted to local foreign owned companies to do project business in Vietnam in order to facilitate the building up of local engineering know-how. The government must create good policies and regulations to secure a fair and sufficient competitive environment in Vietnam. This will have a very positive impact on investment projects, will create higher international and national competition thus driving the market prices down. Also, this is my hope and expectation - will also lead to a more “tender-driven” award praxis.
Vietnamese investment environment to be improved further
Professor Associate and Dr Tran Dinh Thien, vice director of Vietnam Economics Institute
In 2005, foreign direct investment (FDI) in Vietnam hit a record high figure of around US$6 billion, up by around 50 per cent over the previous year. This proves that the Vietnamese investment environment has improved. However, I suppose that the environment should be improved further. With FDI and official development assistance (ODA) capital saw a record increase in 2005, international organisations, foreign governments and investors have had positive evaluation about the local investment environment. However, the figure is just the committed one.
At present, investors are tending to change their investment flows from China to Vietnam. I think the change is normal, simply because investors do not want to put all their eggs into one basket. They have their own options based on many factors and predictions, including social and political stability, historical traditions and economic prospects. In fact, according to investors, they have to slowdown their investment in China because with a stronger Chinese yuan, it may be more difficult for their exports. Vietnam may lose the opportunity with a change in foreign exchange rate similar to China.
Vietnam is exerting efforts to reform customs and taxation to meet the requirements of the World Trade Organisation (WTO). The Vietnamese investment environment will be improved much more if we implement all these commitments. I think that in 2005, we reformed the two fields strongly. However, in comparison with the world, Vietnam will have to exert further efforts or it will be much further left behind.
Nguyen Thoa-Thu Huyen
Vietnamese
