Korean Investors Satisfied with Vietnam's Investment Environment

 

According to the survey, 57.6 per cent of South Korean companies in Vietnam are operating profitably, with US$510,000 on average, while 42.4 per cent are working at a loss but most of them are in the process of recovering investment capital. On average, it takes 3.02 years for a South Korean company to gain profit, from initial penetration into Vietnam.

 

Of the surveyed companies, 105 said their annual revenues were up on average 10.76 per cent compared with 2004, some US$11.12 million.   Besides, 29.89 per cent of companies use Vietnamese sourced materials, while 32.18 per cent import from South Korea and 17.24 per cent import from China.

 

The biggest concern of Vietnam is its admission to the World Trade Organisation (WTO). 63.03 per cent of South Korean companies doing business in Vietnam saw great favours from the WTO entry and 61.08 per cent of South Korean business community believe that the Vietnamese business atmosphere will be improved after Vietnam’s WTO admission.

 

The Vietnamese investment environment is seen as very open. The Vietnamese government has provided great assistance to South Korean firms. 27.54 per cent of them received great support from trade and investment promotion agencies, 23.73 per cent from Vietnamese ministries and branches and 10.17 per cent from South Korean Embassy and Consulate in Vietnam.

 

Some companies pointed to Vietnam’s booming economy with its strong consumption increase is a core reason for their investment in the country, while others found Vietnam an easy access route to the United States, Europe and ASEAN countries. The final key reason for South Korean company’s choice of Vietnam is the low-cost labour and low cost materials. 

 

The low-cost labour is a proven advantage for South Korean investors. 201 companies doing business in Vietnam are employing some 96,000 labourers and with the workforce in remaining South Korean companies in the country the figure reaches around 136,000 people.

 

Especially, workers for the leather and footwear industries attract South Korean firms most. At present, an average workforce in a South Korean shoe company consists of 6,729 Vietnamese workers.

 

Seventy-two surveyed companies said they spent about US$130 million on buying materials and accessories in Vietnam. 19 per cent of them said they would increase expenditures for Vietnamese sourced materials and accessories. This means the market of Vietnamese materials and accessories will further expand in the future.

In addition, asked about investment advantages in Vietnam, 14.55 per cent mentioned high productivity, 5.91 per cent tax incentives and 318 per cent attractive supports from the Government.

 

The most serious difficulties of foreign companies investing in Vietnam are cultural barriers and an incomplete legal corridor. Many South Korean companies are facing a lot of challenges since penetration into Vietnam. 22.71 per cent of companies attributed difficulty to cultural differences, 21.77 per cent to the incomplete legal corridor and 20.82 per cent to red-tape and corruption.

 

Hardships in initial penetration into the Vietnamese market are due to insufficient information and the language barrier, and this has certain negative impacts on their business results. 34.65 per cent said the difficulty in the initial phase entering Vietnam is resulted from information shortage, 18.9 per cent from language barrier, 12.2 per cent from the shortage of investment policies and 11.02 per cent from their particular investment fields.

 

According to this survey report, only a small proportion, 7.14 per cent, of South Korean companies said the Vietnamese investment atmosphere will worsen in the coming time. They said the reason is higher labour costs. While 9.6 per cent said investment conditions in Vietnam are worse than in neighbouring countries.