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Golden opportunities coming, Vietnamese businesses … staying put
Vietnamese enterprises can see a new investment shift wave, when foreign investors relocate their production bases from other countries to Vietnam. However, Vietnamese businesses seem to be unable to grab the opportunities.
The tsunami and earthquake in Japan, the floods in Thailand, and then the yuan appreciation, the new land policy and the minimum wage increases in China all have prompted foreign investors to shift their investments into other countries, including Vietnam.
Especially, the foreign investors include the ones operating in the important fields to Vietnam, such as electronics or manufacturing mechanical engineering, which are also the industries which Vietnam prioritize to develop.
The recent surveys conducted by Japanese Nikkei group have pointed out the big opportunities for Vietnam. Japanese businesses put Vietnam on the fourth position among the Asian countries which have good trade potentials in long term and the third position in medium term. More than 60 percent polled Japanese businesses said that Vietnam is leading the countries which are most attractive to set up production bases.
However, it still unclear if Vietnam can take full advantage of the opportunities. Ngo Van Tru, Deputy Director of the Heavy Industry Department under the Ministry of Industry and Trade, said that Vietnamese policies still have too many problems and that they are not strong enough to persuade investors to bring technologies and capital to Vietnam.
Hikaru Oguchi from Japanese law firm Nishimura & Asahi said at a recent workshop on the Japanese investment in Vietnam that the legal framework of Vietnam, which has to run after the rapid economic development, is inconsistent and changeable. This has been putting big difficulties for investors and for investment consultants as well.
Meanwhile, Hideo Naito from JBIC, said that Vietnam is facing a lot of barriers, including the poor infrastructure, the difficulties in high ranking manager recruitment and the complicated legal framework.
Vietnamese infrastructure is small and weak, which does not allow it to “absorb” all the investment capital. Experts have warned that if Vietnam continues going slowly in upgrading the infrastructure, it may face serious obstacles in attracting foreign investment in the long term.
It is not by chance that the foreign direct investment to Vietnam has been decreasing sharply recently, and finding out the reasons behind this is really a good method that helps Vietnam attract more investment, not only from Japan.
Besides the above said factors, the weak supporting industries of Vietnam have been cited as an obstacle for Vietnam to receive the new investment wave. Vietnam vows to develop automobile and electronics industries, while in order to do that, it needs to have a high number of electronic and car part suppliers.
The products of the supporting industries are only done by the small enterprises which always lack capital and the workshop premises. Meanwhile, the enterprises cannot access capital sources and land. The land price has been escalating, which has led to the sharp rise of the costs for workshop premises. Besides, they still have to pay for importing technologies, training the labor cost. All that kinds of expenses make enterprises hesitant to invest in the supporting industries.
Phan Dang Tuat, Head of the Industrial Policy and Strategy Institute under the Ministry of Industry and Trade, said that Vietnam has realized the investment shift wave already and it has been making hectic preparations for this. In order to support the development of supporting industries, training programs have been carried out in different localities in the countries. Meanwhile, a lot of new policies have been set up to encourage businesses to invest in the field.
However, Tuat pointed out that the State’s support is still not strong enough to make a breakthrough. The policies on giving preferences to the enterprises developing supporting industries have just taken shape, while no project has been approved.
If Vietnam misses an opportunity, it can wait for another to come. But if it does not improve itself gradually, it will miss all the opportunities.
Tran Thuy
vietnamnet
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