The great difference in prices among the north, central and southern regions is one of three problems associated with business costs in Vietnam, leading to the investment imbalance, according to Vietnam Economic Times newspaper.
This is reflected in the foreign investment influx in 2005, which remained significant in southern provinces and cities, remarkable in the north, particularly Hanoi thanks to the capital’s more open policies, but rather weak in the central region, the paper said.
Statistics show that there are three main kinds of business costs, including spending on materials, instruments, and depreciation along with around 16-17 other types of costs such as office leasing, tariff, business registration, labor, transport, water, electricity, and insurance.
Meanwhile, based on foreign investment attraction, one can see a great difference in business costs among regions in Vietnam. The northern midland and mountainous region have drawn nearly US$1billion in foreign capital over the past five years, accounting for 5 per cent of the total; US$1.5billion for the northern and coastal part of the central region; US$3.5billion for the Red River Delta; US$109million for the Central Highlands; and up to US$11.1billion for eastern areas.
Electricity costs for businesses in Vietnam are not high but service quality varies in different regions, causing big losses for enterprises located in central, mountainous and remote areas.
Land cost is another problem; there are around five levels of land lease prices in urban areas, from US$0.18-2.16/sq.m/year to US$10-18/sq.m/year, while the ceiling level in the south is a bit lower. Land price is not too high but it shows the difference of approach between private, foreign-owned, and state-owned companies.
Office lease fees in big cities in Vietnam, like Hanoi and HCM City, are quite high compared to those in regional centers. Meanwhile, infrastructure, even in the capital, is still limited.
There are similar problems for provinces with difficult business environments, for example shortages of brainpower, outdated technology and machinery, high production costs, low competitiveness, especially for state-owned companies.
For provinces in the central region with favorable positions, like Danang and Quang Nam, the main problem is the shortfall of human resources and supporting industries and services, which hinder them in attracting foreign investment.
Shipping costs of enterprises in the north are now the highest in Southeast Asia though Vietnam has a favorable position for sea transport. To bring a 40-feet container to the US, Vietnamese enterprises have to pay US$3,000 on average, compared to US$2,700 in China and US$2,500 in Thailand.
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