Many foreign investors cancel business expansion plans in Vietnam

Representatives of foreign invested enterprises’ associations say a lot of their member companies have decided to cancel the plans to make further investments in Vietnam, while keeping the “wait-and-see” attitude.

The World Economic Forum (WEF) has released the 2011-2012 report on the global competitiveness late last week, which showed that Vietnam fell by six grades from the last year’s report. Prior to that, a lot of foreign investors expressed their optimism about the investment environment in Vietnam which has become less and less attractive.

Cheap labor force – the advantage became a weak point

The cheap labor force was once considered the biggest attractiveness of the Vietnamese market, which helped investors optimize their investment costs in Vietnam.

However, a lot of foreign invested enterprises have commented that the advantage has become a weak point when assessing the quality of the labor force in the market with 80 million people.

Foreign invested enterprises complain that they have to retrain workers after the recruitment, because they cannot find the workers ready for work without training. Of course, the enterprises have to spend big money and time on re-training.

In 2010, Intel Product Vietnam spent over 160 billion dong to sponsor the education cooperation and labor force development in Vietnam.

Meanwhile, Erdal Elver, Chair and Managing Director of German Siemens, said that the company has to spend a lot of time and money to seek suitable personnel for the key positions in its plans to expand the company’s operation. However, it is always very difficult to find suitable candidates. Even after finding the people who can meet some key requirements, the company still has to send the people to the training courses in the region and in Europe.

Elmar Dutt, Managing Director of Tanner Vietnam, said that in order to find the people suitable for the posts, both officers and managers; the company always has to allocate budget for training the personnel for three years, both in professional knowledge and English skills.

Wait and see

When asked about the investment plan in Vietnam, representatives of EuroCham and the German Business Association GBA, said that member enterprises tend to wait and hope for more positive signals of the national economy to come. Meanwhile, in the immediate time, the enterprises have to cut down expenses, restructure production and try to seek new sources of income.

The “wait and see” attitude has been shown at the surveys conducted by EuroCham recently which showed the sharp falls in the confidence index of the enterprises in the business prospect in the Vietnamese market.

The business environment index has been decreasing steadily, from 79/100 points in the first quarter to 70 points in the second quarter and then to 63 points in the third quarter.

EuroCham’s Chair, Alain Cany, said that the high two-digit inflation rate remains the leading concern of the enterprises from Europe. 56 percent of enterprises which joined the survey in the third quarter of 2011 said that the high inflation has significantly affected their business, while 6 percent said the high inflation has been threatening their business.

AusCham’s Deputy Chair, Brian O’Reilly, also said that high inflation proves to be the biggest concern for the Australian investors in Vietnam. He said that Australian investors still want to make investment in Vietnam, but their interests in Vietnam have been lessened.

Meanwhile, Elmar Dutt, who is also GBA’s Chair, said that the biggest worry for German businesses is the prolonged uncertainties of the Vietnamese economy. German investors, who once thought about Vietnam as the number 1 destination in ASEAN region, now rethink their strategy. A lot of German companies are thinking of shifting their business to Thailand, Malaysia and Indonesia where they believe the business environments are more stable.

Source: TBKTSG

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