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.