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Vietnam’s consumption market is becoming more and more attractive as its population increases, which is good for consumer goods manufacturers and service industries in particular. Rising labor costs, however, are resulting in Vietnam losing its attractiveness as a production base, especially for processing and assembly industries.
Japanese FDI has been focused on the service industry in recent times, such as restaurants, retail, beauty salons, and other services that make life more convenient, as incomes and living standards are increasing. Vietnamese consumers are demanding more and Japanese companies have a great deal of relevant experience.
I am interested in the situation of local regions as both a market and a production site. I will take any opportunities to introduce the potential of local regions to Japanese investors.
I think right now Vietnam is a very attractive destination for foreign investment and for German companies. It is in a very good position in ASEAN, where German investors can come and set up their own companies with 100-per-cent foreign capital from the beginning. Moreover, it’s a big market, with 95 million people, adding to its attractiveness.
There are a lot of possibilities. I see great potential in the automotive supply industry, in the food processing industry, in environmental technologies, and, of course, in green energy projects like wind energy, solar power, and also bio energy. Right now we see that a lot of companies that invested in China 15 or 20 years ago are now moving and setting up production in Asia, in ASEAN, and also in Vietnam.
The Chamber launched a new service in 2017 to help Canadian companies connect with potential partners in Vietnam. The service provides industry-specific contact lists, sets up partnering meetings, provides business tours to factories and businesses in Vietnam, and provides a marketing platform that Canadian businesses seeking to enter the market can utilize while they are establishing their operations in the country. We facilitate on-the-ground resourcing and connect companies with potential candidates for their businesses and act as a marketing wing for these companies to host seminars and marketing events in an effort to help them connect with Vietnam’s foreign and local business community.
Vietnam’s business environment and economy makes solid strides forward every year. With GDP growth of over 6 per cent, Vietnam is becoming the envy of Asia. Investment laws have improved significantly since the early 1990s and investors are able to enjoy perks such as tax incentives, single point applications, and a streamlined licensing process. Overall, Vietnam has become a true destination for foreign investment and is no longer the Asian Tiger’s “tail”
There are positives and negatives in Vietnam’s business and investment environment. On the positive side, the government has made continuous efforts to facilitate investment and the business environment has improved greatly as a result and national competitiveness has continually increased. On the negative side, labor costs have risen rapidly and South Korean companies have been directly affected, as they employ more than 1 million Vietnamese workers.
The age of light industry (labor-intensive industry) in Vietnam ended in 2016. The textile industry, which is part of light industry, has already lost its international competitiveness and the bankruptcy rate of small companies is on the rise. Workplace productivity is six to 20 times lower than in neighboring countries. The level of creativity among Vietnamese students, meanwhile, is ranked 120th in the world and educational infrastructure such as R&D and vocational training is poor.
I think there are three industries that are the most attractive. The first is the high-tech industry. The government is aware of an imbalance in the concentration of workers in labor-intensive industries and maintains a positive attitude towards skilled labor-training facilities and high-tech industries to enhance productivity. Secondly, the education and distribution industries have major demand for diverse products and services, such as higher education, commodities, household appliances, and products for maintaining social dignity, where demand is increasing among the younger generation. Finally, demand for financial services is also rising, such as loans for the purchase of vehicles or real estate.
The most prominent South Korean investment achievements range from light industry to electronics and heavy industry. Various data shows that South Korean companies account for more than 30 per cent of Vietnam’s total exports.
There are also difficulties South Korean companies must face: legal ambiguity, inconvenience in accessing accurate statistical data by industry, difficult access to corporate credit information management systems, inaccurate accounting data that is not in accordance with International Financial Reporting Standards (IFRS), and problems in recruiting skilled workers in IT and semiconductor and home appliance factories such as Samsung Electronics and LG Electronics in Vietnam.
In the long term, it will be necessary to have a system that can supply the necessary human resources, by introducing a technical qualification system managed by the government. It is also necessary to improve the speed of imports and exports, which is still not computerized. This is a major impediment that slows Vietnam’s growth.
We will open a B2B website (www.kochamb2b.kr) to support not only South Korean companies but also Vietnamese companies that wish to cooperate with South Korean companies. We will ultimately be able to help enterprises from both countries.
We are happy with the existing business environment in Vietnam. The country still has one of the fastest-growing economies in ASEAN. GDP increased at more than 7 per cent in the third quarter of 2017; an amazing rate. Vietnam’s exports are rising at around 20 per cent year-on-year, which is also astonishing. Manufacturing continues to expand at 12-15 per cent annually.
The State Bank of Vietnam was one of the few central banks in the region to ease monetary and financial policies last year, but so far there has been no noticeable impact on inflation, which remains stable. The foreign exchange rate of the Vietnam dong likewise remains within a controlled band, and Vietnam’s foreign exchange reserves hit an all-time record of $45 billion last September. So, we’re very much positive about Vietnam’s macroeconomic environment. It remains an exciting and dynamic place to engage in business.
Last year, a Congressional Research Service (CRS) report entitled “US Direct Investment Abroad: Trends and Current Issues” stated that “Patterns in US direct investment abroad often reflect fundamental changes that occur in the US economy during the same period. As investment funds in the US economy shifted from extractive, processing, and manufacturing industries towards high technology, services, and financial industries, US investment abroad mirrored these changes.” During the first nine months of 2017, US FDI to Vietnam was predominantly in processing and manufacturing. Vietnam is doing a great job attracting investments in sectors that are less likely to receive US investment.
Having said that, it is becoming increasingly clear to me, as Chairman of AmCham HCMC, that significant US FDI is going into more advanced investment projects in Vietnam, bringing great technologies with it. As Vietnam further develops its economy with more advanced infrastructure and communications systems, I believe increases in US FDI, specifically in the areas of higher technology, finance, and services, will follow closely behind.
VN Economic Times
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