Firms lose no sleep over rough ride

Economic instability is eating away at business confidence in Vietnam, but some transnational firms are keeping the faith.

NSG Group, the world’s leading manufacturer of glass and glazing systems, for instance, last week kicked-off the construction of its two new lines in southern Ba Ria-Vung Tau province, where the firm is already operating a glass manufacturing factory dedicated to solar energy products.

Total investment in the new lines will be around $232 million, with the lines due to go live in 2013. An estimated 500 jobs will be created locally as a result of the investment.

The move is in line with the group’s expansion plans announced late last year, and suggests Vietnam is still a priority for NSG Group at a time when many other foreign investors are getting jittery about investment in this country.

Business confidence has been sharply dropping in Vietnam since the third quarter of 2010 when the economy was reeling under the effects of climbing inflation and the local currency’s devaluation. Vietnam’s inflation in August this year was 23.02 per cent year-on-year, the highest level in Asian region. This high inflation rate, along with the widening trade deficit, forced State Bank of Vietnam to depreciate local currency three times from February 2010 to February 2011. The largest devaluation, 9 per cent, was made last February.

A EuroCham survey reported business confidence and outlook among European companies in Vietnam in the second quarter this year dropped 7 points further to 63. This meant declines for three consecutive quarters.

Meanwhile, a survey from America’s World’vest Base and PetroVietnam Finance Investment and Consultancy Company also underscored sliding business confidence with a 21 point decline in the second quarter of 2011 – from 109 to 88 points.

Newly committed foreign direct investment in the first eight months of this year declined 26 per cent year-on-year, according to the Ministry of Planning and Investment. Japan Business Association in Vietnam chairman Shutoh Noriaki said this mirrored the reality that the importance of investing in Vietnam “is relatively lower now.”

The drop in business confidence appeared to be largely due to continuing concerns about inflation and the weakness of the dong, said EuroCham chairman Alain Cany

But some multinational companies like NSG Group and Kyocera Mita Corporation remain committed to new investments in Vietnam.

Kyocera Mita, the world’s leading manufacturer of office information equipment, planned to start construction of a printer and multifunctional product factory in Vietnam-Singapore Industrial Park in Haiphong city. This will be the firm’s second largest plant globally.

In a similar development, Korea Samsung Electronics Corporation last week reported it had pumped $400 million into a handset factory in northern Bac Ninh province. This amount is part of the $670 million investment the firm committed in 2008.

Panasonic Vietnam, a subsidiary of Japan’s Panasonic Corporation, has just announced a new $84 million investment plan in this country.

The manufacturer reported it had started construction of a factory to produce electronic components in Hanoi-based Thang Long Industrial Park. The plant will go live in August 2012.

Panasonic also announced plans to expand capacity at a freezer manufacturing factory in this industrial park, doubling annual production here to 800,000 units by 2015.

In addition, the manufacturer said it would inaugurate its largest washing machine factory in Asia in northern Hung Yen province. The plant will be able to produce 700,000 units each year.

Panasonic is also to build a research and development centre to develop new electronic products for Vietnam’s market.

“With strong growth, stable politics and an abundant workforce, Vietnam is considered as a potential and key market in global business strategy of Panasonic,” the firm said in a statement released last week, adding that it expected to reach $1 billion in total turnover in this market this year and to record double-digit growth in the period 2011-2015.

Asia’s multinational companies are not the only ones keeping the faith in Vietnam at this time. Last week, Vietnam received a business delegation from the US which included representatives from Chevron Corporation, Coca Cola, IBM and Boeing among its ranks. They came seeking new investment opportunities and preliminary results had Chevron Corporation announcing it was negotiating with PetroVietnam to get involved in a multi-billion dollar investment plan.

Samsung’s rival, Nokia, is also in talks with the Vietnamese government about a $275 million handset factory in Vietnam-Singapore Industrial Park. – VIR

Tags: Vietnam companies, Vietnam enterprises, Vietnam SMEs