FDI enterprises reluctant to invest in Vietnam industry: UNIDO

United Nation Industrial Development Organisation (UNIDO) has revealed that merely 8 percent of FDI enterprises in manufacturing sector would like to expand production in Vietnam.
Recently, UNIDO in collaboration with the general Statistical Office of Vietnam and Foreign Investment Department (Ministry of Planning and Investment) have finalised the draft report on industry investment in Vietnam in 2010.

Although a detailed version will not be available until the end of the year, the initial information partly unveils the outlook of investment in Vietnam particularly in industry sector.

The survey of nearly 1,500 enterprises (57pct of which are FDI businesses) indicates foreign businesses’ pre-tax return of 7.6pct (the average level over the past three years) compared to 6.7pct at domestic firms (DI), which are expected to pick up in the years to come to 9pct and 7.8pct respectively.

FDI enterprises affirmed meeting the targets over the last three years whereas domestic peers optimistically reported their overshooting the goals.

Being one of the rare surveys that look into the “average age” of machines in use at FDI firms, the draft reports the average figure of 10 years for FDI businesses and domestic ones alike.

Still, most of the manufacturers have failed to fully deploy these machines despite such long period with the equipment utilisation rates of 86 percent at FDI enterprises and 84 percent at the other.

The principal attraction of foreign investors to Vietnam’ industry is a newly emerging market that has been partly hit by economic difficulties and cheap labour which has now sparked concerns of quality.

“Several factors that were competitive advantages five years ago may no longer remain”, said Dr Brian Portelli, a UNIDO’s expert.

Massive investment of 400 FDI enterprises and 360 DI businesses out of nearly 1,500 surveyed firms could mean its implications presently negligible. Those who are of intention of expansion in three years’ time account for 8pct and 30 percent at FDI and DI firms respectively.

Another issue included in the report is continuously increasing wages over the last few years which should be accompanied by labour quality improvement and productivity enhancement.

On the brighter side, UNIDO affirms the FDI enterprises’ excitement of improvement in infrastructure and supporting services as well as economic stability.

The majority of information concerning investment climate is reportedly sought through their compatriots with 60pctas opposed to surprisingly low 2pct via diplomatic representatives, 6pct visa trade and investment promotion agencies.

“The reality raises the importance of further involvement of such agencies so as to concentrate on investment quality rather than quantity”, deputy minister of Planning and Investment, Dang Huy Dong said at the announcement of the draft report on September 23.

Also, outward investment of 12 FDI enterprises and 10 FDI firms is mentioned in the draft, which would, to some extent, signal their strong competitiveness, and yet cast the doubt on the likelihood of FDI outflows out of Vietnam.

Source: Vietbiz24.com

Tags: invest in Vietnam, Vietnam FDI, Vietnam FDI 2011, Vietnam investment