11:04 (GMT +7) - Tuesday 27/06/2017

Business

Think again

Released at: 02:49, 28/07/2014

Think again

Vietnam's economy represents a land of opportunity for foreign investors and those deterred by short-term turbulence may regret it in the long run.

by Thong Dat

    Those who predicted a massive exodus of foreign investors following the recent territorial dispute between Vietnam and China may have the good reason to think again. True, the dispute could not have come at a worse time for Vietnam’s economic recovery, which is currently more or less on track. But gloomy forecasts have been made before and many times proven incorrect. The short answer is that businesses and investors who leave the country may miss out on the lucrative opportunities on offer in the long term. This was one of the main points emphasised by experts and international corporate leaders who gathered at the Vietnam Business Insights forum held by leading regional broadcaster Channel NewsAsia last month.

    With annual GDP growth forecast at around 5.6 per cent in the years to come Vietnam is poised to be among the 20 largest economies in the world by 2050. “The country has a diverse and dynamic economy, natural resources and commodities to sell, and most importantly, a young and increasingly well-educated population who are hard working and driven,” said Ms Debra Soon, Managing Director of Channel NewsAsia, adding that the broadcaster’s intends to open a bureau in Vietnam this year. “We want to be able to tell the story of Vietnam’s growth and development, its challenges and its people, from the ground,” she said.

    Various measures initiated by the government to implement reforms and fast track the decision-making process have improved the country’s investment and business environment and raised its competitiveness. “To add new chapters to Vietnam’s success story, the government is continuing to revitalise its business and investment climate,” Prime Minister Nguyen Tan Dung told the World Economic Forum on East Asia in Manila last month. “One way it is doing this is its work on three ‘strategic breakthroughs’: putting in place market economy institutions and a legal framework, building advanced and integrated infrastructure, particularly transport, and developing a quality workforce. These should all be completed by 2020.”

    While positive changes in the local economy have been challenged by the recent complications in the East Sea it seems that foreign investors are not deterred by the short-term turbulence. The government has won praise from investors for its policies and measures to support businesses suffering from damage caused by the illegal protests that took place in some areas. “I believe that the government’s quick response to the recent situation has eased investors’ concerns,” said Mr Warrick Cleine, CEO of KPMG, Vietnam and Cambodia, who has been in the country for 16 years.  “In the long run, investors don’t need to be concerned as prospects remain bright.”

    Official figures again indicate that Vietnam remains a destination of choice for foreign investors. As at April there were more than 16,300 active foreign direct investment (FDI) projects in the country, totalling $238 billion. Investors have come from 100 countries and territories and many are some of the world’s leading multinational corporations. In 2013 FDI inflows exceeded $22 billion, an increase of more than 35 per cent against 2012.

    The Taiwanese bicycle chain maker KMC Kuei Meng International announced last month that it will invest about $5 million in Vietnam in the second half of the year as it enters the Southeast Asian market. The company plans to build a new factory capable of making 15 million chains a year at the AMATA Industrial Park and construction is expected to be completed within 12 months. “Since we only have limited capacity for bicycle chains in Southeast Asia, a new factory in Vietnam can help us enter the market,” KMC President Daniel Wu was quoted as saying.

    Cause for optimism lies in Vietnam’s large population and resulting huge pool of human resources, making it an attractive market for business