V V G ~ Business and Investment Articles
opyright © 1999-2014 Vietnam Venture Group, Inc. All rights reserved. Updated March 2, 2004
By: Peter N. Sheridan
remains blessed with a uniquely
well-endowed work force among its 80 million educated (93% literacy) men and
women, more than 50% of whom are under 35 years old.
the most part Vietnamese cherish education and both the desire and ability to
still learn more from all sources. Here
then is the challenge:
once again faces a special opportunity: to take up the investment capacity from
neighboring lands that are loosing investment dollars to China.
from behind due to its long isolation from the worlds' community, the people of
Vietnam have demonstrated their willingness to be trained, their capacity to
learn, and their desire to earn. The skilled and unskilled labor force of
Vietnam, nine years after the long embargo was lifted, shows a loyalty to fair
employers and a keen ability to overcome challenges when learning new techniques
and technologies. This is the envy of the world.
these elements have a direct impact on profitability, levels of productivity,
worker safety, and quality work product are key factors sought when Foreign
Direct Investors look for and then place new manufacturing facilities.
Stability of the economic and political climate is also needed.
placement of regional offices, the
real key to sustainable economic growth, requires more. Hong Kong has been
loosing and continues to loose ground to Shanghai and Singapore as new centers
for regional offices. However, it is Singapore's lack of manufacturing
capacity due to a small and very costly worker population that makes it a second
choice to any Southeast Asian location that has a strong, economically
beneficial worker force and an equally stable business and political
Malaysia, and Thailand have gained in Foreign Direct Investment (FDI) and the
placement of new, regional offices because of Hong Kong’s malaise and the
combination of high prices and small work forces in both Hong Kong and
Singapore. Both these two,
previously exclusive centers of all FDI in the region have lost ground since
the past five years, the balance of foreign investment dollars has favored China
due primarily to the immense scale of China’s internal market. Today,
more than 60% of all FDI in Asia goes to China. While manufacturers
recognize the risks of playing with a loaded gun, it is instructive to see how
far they will go not to shoot themselves.
lies Vietnam's unique opportunity to
rival if not excel China as a leading manufacturing and financial center. And
to move in a direction that will not ever be China’s -- to be the Southeast
Asian center for Regional Offices.
is a 2,000 year-long history of conflict that is renewed every few decades as
drastic reminders of the ill wind that blows south from its huge northern
neighbor. Vietnam has not always
received benevolent, or even friendly, handshakes from this not-always sleeping
both are Communist states to the core, complete with many recent examples of
opaque and sometimes harsh policies that confound foreign investors, central
command authority developed for different reasons in both lands. Vietnam has
always had the ability but not the resolve to change its complexion and label,
and great strides have been made to acclaimed success these past nine years.
describing itself as a "new wine in an old bottle," others and we have
long suggested to our Vietnamese friends that it's time to decant. Yet little
real change has happened. Small measures have been taken (decreasing the cost
and time to licensing as only one example), but the larger picture can and
should be quickly re-drawn.
are joined in this call by eminently respected offices from within and far
outside the region.
to Japanese experts, Vietnam's investment environment is not attractive enough
to many foreign investors, especially Japanese businesses.
They opine Vietnam should do more to improve the investment climate,
a forum recently (late 2002) initiated by the Japan External Trade Organization
(JETRO) to form a link with local officials, participants said the business
environment in Vietnam is still less attractive than in other regional
countries. According to PricewaterhouseCoopers Vietnam (PCV), compared with
other Southeast Asian countries, doing business in Vietnam is still difficult in
terms of taxation, labor recruitment, land policies, copyright and others.
is lagging behind other regional countries regarding tax, the dual-pricing
policy and regulations on land transfer and ownership," a PCV spokesman
said at the fourth meeting of the Task Force.
in HCM City said Japanese investment capital inflow into Vietnam this year
increased little and proposed Vietnam look into the issue to find remedies.
Hikekazu Mita, director of Vietnam Japan Gas, pointed out that the biggest
challenges to Vietnam now are how to develop the infrastructure and sharpen
competitiveness ahead the accession to the ASEAN Free Trade Area (AFTA).
representatives proposed arranging a mission to China to learn the way the
Chinese do to attract more investors. Japan's investment in China is 33 times
bigger than in Vietnam.
Thailand’s business friendly Prime Minister Shinawatra (the nation’s wealthiest individual as well), yet struggles with challenges that include (i) a dominant border conflict with Burma that suffers too often repeated cross border battles if not open warfare for more than 400 years, and shows no sign of abating; (ii) an even older corrupt system of government that resiliently resists change, much less modification, (iii) an over-priced and under-performing employment population that suffers at all levels -- from unskilled workers to senior managers.
benefited as a direct result as Thailand lost FDI that sought and still seeks a
new home. However, since the
economic melt-down of 1997, the tightly wound spring that is Prime
Minister Mahathir started to uncurl. Mohammad
announced plans to end his two-decade rule - but not until late in 2003. This
creates a long and politically painful process.
has not been the darling of
foreign investors, he earlier brought an air of stability. But even that
predated the man’s personal credibility meltdown that begin in year 2000
when he jailed the very popular former deputy, Anwar Ibrahim.
Now, as the world worries about the
expanding religious fundamentalist network, there are new and rising concerns
over the safety of all foreigners and their investments in Malaysia, causing
investors to look more openly for a more stable environment.
will not be found in Indonesia,
which poses a special and worrisome matter for the entire world, not just
Southeast Asia and FDI. Recent
reports abound of only trouble ahead. In spite of huge oil and natural gas reserves, a larger
population base, and favorable wages, the nation has long faced productivity
challenges from an expensive, under performing, and largely disloyal work force.
Now it also faces crippling power outages that are expected to continue
for years to come.
say the absence of an honest and reliable legal system is a major reason they
stay away from Indonesia. Other
complaints sound familiar to investors in Vietnam: arbitrary demands by the
government officials, tax collectors, and domestic partners, with no recourse in
the courts where bribery is rampant and favoritism is the legal standard for
dispute resolution, and where judges routinely refuse to enforce contracts
against domestic companies.
is reported that Indonesia suffered a net capital outflow in year 2001 of US $
5.7 billion and for the fist 7 months of 2002, a further erosion of more then
50% of all foreign direct investment.
question that is not hard to
answer is, “where to invest if not in Thailand, Malaysia, or Indonesia?”
For the past five years, the answer should have been “VIETNAM!”
still can be. But a sea change is needed. FDI
in Vietnam experiences growth only in fits and starts. There is yet no
sustainable growth seen. Vietnam FDI enjoys a step or two forward before
suffering one or two steps back. Since 1986 Vietnam has charted a course of
development and renovation called “Doi Moi.”
Since 1994 Vietnam has been accepted by the world’s nations as a viable
trading partner in a “market-style economy.”
Since 2000 Vietnam has enjoyed Most Favored Nation (Normal Trade
Relations) with America.
yet there is no great leap forward. We
were recently asked why we couldn’t find investors who want to put new money
into Vietnam. The answer is clear:
Vietnam must first make the investment climate truly investor friendly. Then
Vietnam will enjoy new and sustained growth.
is especially true as there is now less competition from Vietnam’s neighbors
than ever before. Too many in
Vietnam seem paralyzed by analyzing what and how to move forward. The path is
clear, only the method of achieving success is not resolved.
core problems can quickly be cured. Vietnam retains that unique ability but not
yet reached the resolve. Then Vietnam will become the regional economic power
for high-end manufacturing, regional offices, and tourism that it always should
have been since 1945.
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