Vietnam's ASEAN entry to lure investors

Vietnam's ASEAN entry to lure investors

By Tim Johnson

HANOI (Kyodo): Vietnam's entry next week into the Association of Southeast Asian Nations (ASEAN) should give a psychological boost to ASEAN businesses contemplating investments in the country, according to a top Vietnamese business official.

"With Vietnam joining ASEAN, I think all ASEAN countries can feel more comfortable when they go to invest in Vietnam," Pham Chi Lan, secretary general of the Vietnam Chamber of Commerce and Industry (VCCI), said in an interview.

Lan said Vietnam expects more attention to be drawn to the potential for tapping Vietnam's abundant natural resources, cheap labor, high economic growth rate and tantalizing market of 72 million consumers.

At the same time, the ASEAN entry will benefit Vietnam by increasing its access to investment capital, expertise, technology and markets for its exports, she said.

ASEAN members have significantly increased their investment stake in Vietnam in recent years, though most lag far behind such big-leaguers as Taiwan, Hong Kong and Japan.

Lan said that by mid-May this year, ASEAN members had committed themselves to 203 direct foreign investment projects in Vietnam with a combined capital surpassing US$2.54 billion.

The figure represents a doubling of the $1.2 billion in ASEAN cumulative investment commitments registered at the end of 1993.

The cumulative total for ASEAN investment accounts for almost 17 percent of all foreign capital invested in Vietnam. That compares with 15.5 percent at the end of 1993 and only 7 percent at the end of 1991.

The flow of investment was previously hindered by such constraints as the U.S. trade embargo and ASEAN opposition to Vietnam's occupation of Cambodia, as well as Vietnam's own lack of receptivity prior to 1987.

Among ASEAN countries, Singapore and Malaysia have led the way in setting up business operations in Vietnam, ranking fourth and seventh respectively among the 10 biggest foreign investors in Vietnam.

Having appeared extremely cautious during the early stage of Vietnam's economic reforms, Singapore's stake in Vietnam has rapidly grown since 1992 to reach 95 direct investment projects worth a total of $1.44 million by mid-May.

Over 60 percent of its investment is in the area of property development, though it also has a substantial stake in the manufacturing, food and beverage, and service industries.

Malaysia had 39 projects worth a total of $ 632 million, most of it in the plantation, oil and gas, banking and hotel sectors.

Thailand, ranked 13th overall, had 47 projects worth $ 290 million, while Indonesia, Vietnam's 19th largest investor, had 10 projects worth a total of $ 112 million.

Least active of the ASEAN investors were the Philippines, which had 11 projects worth $ 63 million, and Brunei with only one project worth $ 2.5 million.

Lan said Vietnam particularly looks to ASEAN countries for investment in the processing and marketing of agricultural products, where they have considerable expertise and experience.

She pointed to Thailand's cooperation with Vietnam in the marketing of rice, Indonesia's cooperation in the marketing of coffee and Malaysia's cooperation in the marketing of rubber.

"We are competitors but at the same time we cooperate with each other," she said. "Together we can develop better industries in Vietnam, while at the same time strengthening these countries' positions in the world markets for these products."

At the same time, however, Vietnam must avoid relying too heavily on its ASEAN partners for investment, Lan said.

"In some fields we expect the countries with more advanced technology, with better capacity to become involved," she said, citing telecommunications as one example.

But even in such fields, she said, there is a role to be played by ASEAN countries in providing services and working as subcontractors for Western countries in the projects in oil, infrastructure and other fields in Vietnam.

Lan predicted that non-ASEAN countries will look increasingly to Vietnam as a base from which to increase their exports to other ASEAN countries.

But she said Vietnam must strive to maintain competitive advantage over other regional countries which are similarly trying to attract investment, such as China, Bangladesh and Myanmar.

"It's still important to improve our competitiveness, not only compared with other ASEAN countries," she said. "When investors decide to go to Vietnam, they should have good reason to select Vietnam as the place to go."

Lan said Vietnam will not be able to forever rely on low labor costs to attract foreign direct investment.

"For many industries, people are not looking exclusively for low labor costs, but place more importance on skilled labor or the efficiency of the manufacturers," she said.