Worries over investment costs in Vietnam

18:24' 06/06/2007 (GMT+7)

VietNamNet Bridge – Compared to 2005, monthly wages of Vietnamese workers and engineers in foreign-invested companies in 2006 increased by only 16% and 25%, respectively, but they were still competitive against the average of the region, 28% and 11%. The transport fee to Japan’s Yokohama Port fell remarkably against the average of the region, a reduction of around 13% in 2006 compared to 2005. The monthly wage of medium-level managers rose very highly, 40% more than 2005 while it was 7% on average in the region. The average office leasing fee was $34.7/sq.m/month, only lower than Singapore. Moreover, HCM City is considered one of the most expensive cities in Southeast Asia based on total expenditures. This is the result of a survey by the Japan External Trade Organisation (JETRO) conducted in 30 big cities of Asia in late 2006. JETRO’s expert K. Ishwata warned at the Vietnam Enterprise Forum that Vietnam would gradually lose its competitiveness in investment costs if the country couldn’t control the stability and correlation between prices and quality of services. “The control not only comes from policies but from the operations of enterprises providing services in Vietnam. Therefore, competition among service providers needs to be further strengthened,” he said. Mr K. Ishwata also said that other kinds of expenses like telecom, power, tariffs, and sub-expenditures in Vietnam were still stable compared to those of the region. In particular, the change of corporate income tax in Vietnam to make it equal to the average of the region has been highly applauded by investors. Actually, calculable investment costs in Vietnam are still considered low but business-related problems that create costs are unknown to foreign investors. In JETRO’s survey, besides inadequate developed infrastructure facilities, investors still complain about troublesome administrative formalities, unstable and unclear policies, underdeveloped system of economic laws and management and application of regulations on arbitration. Truong Van Doan, Deputy Minister of Planning and Investment, said that Vietnam was still weak at popularising its information about investment policies and rules. When foreign investors meet with Ministry of Planning and Investment officials they often ask about details of regulations that they could easily get from websites and their embassies. The slow development of supporting industries also causes difficulties for investors in seeking sources of supply of component parts and materials on the spot. Only 23.6% of Japanese investors in Vietnam can rely on the local supply of component parts compared to the average of 40% in the region, JETRO’s survey reveals. Japanese investors continue to praise Vietnam’s political and social stability and its competitive production costs in comparison with those of China. Japanese investors in ASEAN said that labour and production costs in some fields like electronics, electrics, of Vietnam were cheaper than those of China. 100% of producers in the metal production area agreed with this. Similarly, in a recent survey of the Korean Chamber of Commerce and Industry in Vietnam, most Korean investors said that they came to Vietnam for its attractive labour force, both trained and untrained. Lee Ku Taek, Chief Executive Officer of Korea’s Posco group, said that Posco Vietnam’s contingent of qualified Vietnamese employees who were able to assume major tasks had helped Posco save expenditures since it didn’t have to use Korean experts. This is one of the reasons that Korean investors highly appreciate Vietnam’s general competitiveness compared to other Southeast Asian countries. (Source: VNNet)