A SURGE in the number of foreign businesses increasing investments in Vietnam reflects the nation’s improving investment environment. More than 230 foreign companies registered to increase investment by a combined $539 million in the first seven months of this year, according to the Ministry of Planning and Investment.
The recent opening of Hanoi’s first Metro Cash and Carry supermarket reflects increasing foreign investor confidence in Vietnam.
The expansion plans support a recent survey by the Vietnam Business Forum which found a majority of businesses believed the outlook in Vietnam would improve in the future. Many companies surveyed also said they planned to expand operations due to growing market and political stability.
A survey by the Japan External Trade Organisation found 64 per cent of Japanese companies in Vietnam plan to expand their business in the next one or two years.
Among the companies increasing their investment are Cai Lan Oil, upping its capital by $18 million; fabric-producer Tainan, increasing its stake by more than $20 million; and the Taiwanese-backed Royal International Joint Venture in Halong Bay that has announced plans to increase its investment by more than $10 million. Royal International last year raised its investment from $39 million to $46 million.
Royal deputy director Ha Quang Long said the fresh investment would be used to build a larger hotel complex that might eventually have 700-1000 rooms and conference and entertainment facilities.
“At first, we intended to build a four- or five-star hotel with around 300 rooms. However, with a positive long-term outlook for tourism in Halong Bay, we thought we could develop a much larger project.”
The joint venture now operates an 11ha amusement park, international electronic gaming club and 112 villa-styled rooms in Bai Chay beach.
Life insurance firm Prudential Vietnam late last year raised its investment capital from $40 million to $62 million. It was the second time the company increased its registered capital after an increase in 2001 from $15 million to $40 million.
Japan’s Nidec Tosok in Ho Chi Minh City’s Tan Thuan Export Processing Zone raised its investment from $1 million 10 years ago to more than $80 million.
This is only after Thailand’s 73 per cent and well above Asean’s average of 50 per cent.
Besides, 66 per cent of respondents expect more profits in Vietnam this year – due to expansion of both exports and local sales – second in Asia only to India’s 81 per cent and well ahead of next country, China, with 54.2 per cent.
To fulfil their prophecy, Japanese companies in Vietnam intend to increase investment and diversify products. Other measures they are likely to adopt are increase value-addition and reinforce design and research and development functions.
Most Japanese companies are pleased with the recent decreases in domestic telephone tariffs, which are now among Asia’s lowest, and income tax rates, which are also lower than in most other countries.
Only in Vietnam and India, the Japanese companies say in the survey, are wage increases not causing lower operating profits; they claim this to be a considerable problem in Indonesia and South Korea.