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Vietnam's 'tiger' economy limping: Investors
Celebrated as a new "Asian Tiger" two decades ago, Vietnam has lagged behind its neighbours and needs further reforms in order to catch up, foreign investors say.
Overloaded infrastructure, an under-qualified workforce, excessive bureaucracy and corruption are just some of the problems investors cite.
"Most investors agree that Vietnam has huge potential," says Adam Sitkoff, executive director of the American Chamber of Commerce Vietnam (AmCham).
"However, the country is struggling to live up to its full potential, hindered by slow progress on a list of perennial barriers to investment."
Over the past two decades Vietnam has been among Asia's fastest-developing countries, with average annual growth of 7.1 percent between 1990 and 2009, according to the Asian Development Bank.
With a per capita income of about US$1,200, the nation of 86 million people is now a "middle-income" country, according to World Bank criteria.
But Vietnam remains far from resembling Taiwan, Singapore or South Korea, whose fast growth earned them the label "Tiger" economies, and whose success it dreams of emulating.
The country "risks falling into the 'middle income trap', the inability to arise out of an economy based on cheap labour and low-technology manufacturing methods," said Matthias Duhn, executive director of Eurocham, the European Chamber of Commerce in Vietnam.
The warnings come just before a five-yearly Party Congress, expected in mid-January.
The Congress will determine key political posts for the next five years, as well as the country's main "economic themes", said Benoit de Treglode, director of the Research Institute on Contemporary Southeast Asia (IRASEC) in Bangkok.
Foreign business leaders re-emphasised their concerns on Thursday at the twice-yearly Vietnam Business Forum, held by the World Bank and Vietnam's Ministry of Planning and Investment.
They urged infrastructure development, upgrading workers' skills, streamlining bureaucracy and other reforms.
The chairman of AmCham also told the forum that Vietnam has violated its World Trade Organization commitments with a new price control law targeting overseas firms.
"Too much attention has been given to the increase of investment rather than that of quality, productivity, efficiency and competitiveness," Tran Tien Cuong, of the Central Institute for Economic Management (CIEM), was recently quoted as saying in the state Vietnam News.
Eurocham cites estimates that Vietnam needs around $70 to 80 billion worth of investment in road, rail and seaport infrastructure in the next five to 10 years.
The figure rises to $120 billion if energy infrastructure in the power-short nation is included, it said.
Other obstacles include endemic corruption and the instability of the Vietnamese currency, the dong, which has been devalued three times since late last year.
Serious concerns have also emerged in recent months about the financial health of big state conglomerates.
While Vietnam Airlines stands out as a regional player, investors wonder whether other state-owned firms are in the position of Vinashin, Vietnam Shipbuilding Industry Group.
The company has been driven to the brink of bankruptcy with debts of at least VND86 trillion ($4.4 billion).
AmCham's Sitkoff regrets that the state sector continues to play a dominant role in the economy.
"Investors wonder which over-extended state-owned conglomerate will be the next to fail, or which will be forced into taking bad assets onto their balance sheets," he has said.
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