Many foreign investors have expressed interest in the Vietnamese market but poor infrastructure and logistics have made them hesitant to do business here in the country.
Addressing an annual business event held by HSBC Vietnam on September 24, Amanda Rasmussen, chief operating officer of ITL Corp, said that the restrictions of the infrastructure in Vietnam, including overloaded airports, limited waterway transport and heavy reliance on roads, have negatively affected U.S. investors’ decisions on investing in Vietnam.
Rasmussen told the event that Vietnam’s logistics costs currently account for 21% of gross domestic product, much higher than in developed economies such as the United States and other Southeast Asian countries.
High logistics costs push up firms’ costs, she noted.
Sharing this view, Pham Hong Hai, a board member of HSBC Vietnam, explained that infrastructure was one of the main drags on investment attraction in Vietnam despite the country’s low-cost labor and fast-growing market.
In addition, other problems such as tax policies, regulations and cyber security have also hindered foreign investment activity.
Hai, however, said that some investors could see challenges while others could see opportunities here in the nation. The Government has succeeded in maintaining macroeconomic stability and gradually improving its legal framework, he said.
Pham Sy Thanh, director of VEPR's Chinese Economic Studies Program, noted that China-U.S. trade tensions have opened a window for Vietnam to attract more foreign investors as businesses are moving out of China to mitigate their exposure to the ongoing trade dispute between the world's two largest economies. SGT
Vietnam needs to address the shortcomings in its port infrastructure to fully benefit from its economic development.
The State must play a key role in investing in the national railway infrastructure to boost development and attract more private investment, experts have said.