The year 2013 will see many other countries emerging as competitors in attracting investment, representatives of foreign business associations in Vietnam said.

Urgent need for improvements

Kim Jai Woo, chairman of the Korean Chamber of Commerce in HCMC (KoCham), told the Daily in an interview via email that the global financial crisis had lasted since 2008, but the global economy is expected to recover in 2013.

As China is cutting investment incentives for foreign companies, more Korean investors this year will come to Vietnam in areas of manufacturing and infrastructure, such as ports, bridges, and roads, said the KoCham chairman.

Nevertheless, if Vietnam fails to create an agreeable environment, Korean firms will shift their production to other countries, he added. There’re now about 2,500 Korean businesses operating in Vietnam.

Herb Cochran, executive director of the HCMC Chapter of the American Chamber of Commerce in Vietnam (AmCham), said Vietnam is no longer the top-rated investment destination for U.S. companies, since Indonesia, Malaysia, Bangladesh, and even Myanmar seem to attract more interest these days.

While many U.S. firms are successful in Vietnam, a growing number of AmCham companies are finding it more difficult to conduct business here than in the past years. Recent moves by the Government have caused numerous investors to rethink their business and expansion plans in Vietnam, Cochran said.

“Non-market administrative decisions on which items can be imported, how products can be priced, who can work in Vietnam, which programming can be broadcast on television, who can provide health care, and much more have contributed to a perception that investors are not welcome in Vietnam,” he added.

Given the current state of the economy, Vietnam should make every effort to entice foreign investment and resources. To retain existing and attract new FDI, Vietnam’s Government needs to listen to existing FDI companies, according to the representative of AmCham.

“We meet regularly with the Government in the Vietnam Business Forum and other consultations opportunities to discuss what the Government and businesses could do to attract more U.S. FDI,” said Cochran. “Unfortunately, not many of our recommendations have been accepted in recent years, nor have many recommendations from other foreign business associations or international experts,” he said.

In addition, Kim Jai Woo from KoCham added that the Government needs to pay more attention to decisive factors concerning investment, such as curbing production cost increase.

Business opportunities in 2013

According to AmCham, in general, the confidence of the American business community already operational in Vietnam is strong.

Sectors that are attractive for American investors in 2013 include consumer goods industries, both fast moving consumer goods (FMCG) and quick service food (QSF) franchises. Services are also of great interest.

Moreover, the investment outlook for “modern manufacturing” companies is promising, said Cochran. Examples include the Intel investment of US$1 billion in an assembly and test facility in Saigon Hi-Tech Park, and projects by General Electric (GE) and Jabil from the U.S.

Owing to such investments, Vietnam has increased high-tech exports amid a global slowdown. Vietnam’s shipments of electrical machinery to the U.S. climbed 58% in the first eight months of 2012, while China’s sales to the U.S. in the same category rose 11%, Malaysia’s grew 4%, Thailand’s slid 5% and Indonesia’s fell 16% in the period.

However, lack of trained workers and increasing wage costs without productivity gains in factories coupled with bottlenecks in transport infrastructure, customs, and business services may slow the growth of Vietnam’s exports to the U.S.

Sectors that are no longer as attractive for new FDI as in the past include apparel, footwear, furniture, and other low value-added manufacturing, which have been responsible for much of Vietnam-U.S. trade.

Nearly two-thirds of Vietnam’s exports to the U.S. in 2011 were consumer products such as apparel, footwear, furniture. Apparel alone accounted for 41% (US$7.2 billion) of Vietnam’s total exports to the U.S. in 2011.

However, the hope for Vietnam is that exports of “modern manufacturing” and services will rise, both in export revenue and employment, said the AmCham executive director.

Representing Australian businesses in Vietnam, Brian O’Reilly, chairman of the Australian Chamber of Commerce (AusCham) HCMC, said that business confidence in general has not been all positive due to the tough economic conditions.

The perception is that 2013 will also be a tough year but there is hope that after that the global and local economic situation will improve.

There are some Australian companies that are planning to increase investment over the next few years. However, the continued growth would be greatly enhanced with the urgently needed improvements of business conditions in Vietnam, he said.

The AusCham HCMC chairman cited a number of opportunities for Australian entrepreneurs to develop their businesses in Vietnam in areas of infrastructure, education, agribusiness, food and beverage, tourism and mining.

By Tran Thu - The Saigon Times Daily - January 2, 2013