October 3, 2006
Minister of Planning and Investment Vo Hong Phuc and almost 100 Vietnamese businesses left Hanoi Monday for the UK to promote investment at the “Vietnam Days” event scheduled for Oct. 4-8.
The delegation will attend a forum on trade, investment and tourism and a series of workshops to promote indirect investment and financing services as well as on foreign direct investment, energy and infrastructure.
Business executives from giants in petroleum, marines and tourism also plan to conduct market surveys in several regions and promote investment from British leading companies.
Vietnam and Britain recorded $1.4 billion in two-way trade revenues in 2005.
Vietnam exported footwear, garments, wooden furniture, road transport facilities and machinery, and imported pharmaceuticals, medical equipment and telecommunications parts.
The UK has so far invested in Vietnam 74 projects, capitalized at over $1.3 billion, ranking 12th among 74 foreign investors and third among EU investors in Vietnam.
August 24, 2006
Interest fueled by US trade pact and rising costs in India, China
HO CHI MINH CITY — In the 20 years since Vietnam began its policy of Doi Noi, or reform and opening up, the country has mostly missed its opportunity of becoming Southeast Asia’s newest miracle economy.
But Vietnam’s signing of a free-trade pact with the US in 2001 and its current negotiations to join the WTO, coupled with rising costs in China and India, have joined to reignite global investors’ interest in the country.
“Vietnam is where the action is now — it’s like a gold rush,” said Than Trong Phue, Intel Corp.’s country manager in Ho Chi Minh City. “You’ll be foolish if you miss out.”
Until recently, this was the mantra that described China, and to a lesser extent, India. But as capital has poured into Asia’s fastest-growing economies, their labor costs rose 25 to 40 percent last year, dulling their attraction.
Today it costs about $125 a month to hire a factory worker in southern China and about $750 to hire a moderately skilled software engineer in India. That may sound low, but in Ho Chi Minh City, the minimum monthly wage for factory workers is $65 and for young managers it is about $350 — and that’s after a 40 percent increase in the government-mandated minimum wage in February.
Phue said that’s partly why Intel passed up the opportunity to expand the two factories it has in Chengdu and Pudong in China, and set up a $600 million chipset factory at the Saigon High-Tech Park, about 30 miles east of Ho Chi Minh City.
“Our management made the strategic and economic decision to hedge against China,” Phue said. “Betting big on Vietnam is a calculated risk, but Intel likes to be the pioneer. And wherever Intel goes the Dells and HPs usually follow. So you see Vietnam is on the point of great growth.”
Visions of a transformed Vietnam have teased investors before. Hanoi made its first tentative steps toward economic reform in 1986, but hemmed and hawed over dismantling its Communist-era controls for almost a decade.
In 1995 Vietnam made headlines again when it normalized relations with the United States. But the Asian currency crisis of 1997 quickly dried investors’ appetite for emerging Asian markets.
“Yes, Vietnam has been slower than China [in opening up], but it’s been a bit more prudent,” said Kham “Tom” Doan, a 34-year-old Vietkieu, or Vietnamese-American from New York, who quit his job with Bank of America Corp. to return here and start a financial management firm called Horizon Capital Advisors. The local currency, the dong, “isn’t fluctuating much, infrastructure is improving all the time . . . and there’s stability in the system.”
Proof of growing confidence in the economic situation is evident in how warmly global investors embraced the Vietnamese government’s first bond offering in October.
Hanoi, which has plans to spend an estimated $115 billion on infrastructure over the next five years, asked investors for $500 million. It was offered $4.5 billion and finally decided to raise $750 million.
The government also has a stated plan to attract $25 billion in direct foreign investment over the next five years, and investors poured $5.8 billion into Vietnam last year alone, helping the economy grow 8.5 percent and making it one of Asia’s hottest, according to the Asian Development Bank.
The bilateral trade agreement between Vietnam and the United States was responsible for much of the $6.5 billion in goods Vietnam exported here last year. But Hanoi also is taking significant steps to boost investment in domestic enterprises.
Earlier, the two main laws governing business in Vietnam — the United Enterprise Law and the Common Investment Law — gave powerful state-owned companies substantial preferences over foreign-invested firms. But over the past year the laws have been amended, and the playing field has been somewhat leveled.
Though foreign investors are still restricted from owning more than 49 percent of a publicly listed company, many of the restrictions that prevented investors from owning 100 percent of local subsidiaries and forced them into uncomfortable joint ventures with Vietnamese partners also have been lifted.
Doan said there’s also little doubt the government “wants to privatize and equitize” its massive and mostly inefficient public sector. As proof he pointed to the government’s decision in January to list Vinamilk, one of Vietnam’s largest state-owned enterprises, on the country’s stock exchange.
Foreign investors, eager capture some of this growth, have been emboldened by a recent Merrill Lynch report that said Vietnam “will be the fastest-growing Asian country in the next 10 years,” and that Vietnamese shares were a 10-year buy on the strength of recent policy changes.
Starting last year, several Vietnam-focused investment funds have been launched, including a $100 million fund from the Framingham, Mass.-based International Data Group that will invest in Vietnam’s fledging but promising IT industry.
Vietnam’s economic attractiveness also has been boosted by Microsoft Corp. founder Bill Gates, who visited the country for the first time in April and said it has the potential to develop into an outsourcing center similar to India.
With Vietnam’s per-capita annual income now about $650, poverty rates have decreased from about 58 percent in 1993 to about 19 percent today, and domestic consumption rose 20 percent last year, according to official figures.
Of course, such euphoria could backfire.
Vietnam remains an even more opaque authoritarian state than China, though one wouldn’t know it from the street because the country’s easy Southeast Asian culture.
Corruption is high — most of the Mercedeses that whiz around Hanoi’s or Ho Chi Minh City’s gently frayed colonial-era streets are bought with tainted money, many locals say.
World-class managers are difficult to find, and the country’s legal system remains frail, said Christopher Muessel, an attorney in the Ho Chi Minh City offices of Baker &McKenzie, a leading global law firm, and vice chairman of the American Chamber of Commerce in city.
Doan also said that while Vietnam offers lots of opportunity, “it can’t really compete with China and India because it doesn’t have the scale.”
But not being China could actually be a good thing at a time when legislators and unions have become more critical of growing US economic ties with China.
“It means Vietnam’s a smaller target, off anyone’s radar,” he said.