‘Vietnam loses many advantages in attracting investments’

High interest rates, low ability in accessing capital together with inadequate legal and policies and tax and land are making Vietnam become increasingly less attractive than the neighbouring countries in attracting foreign investments.
Indonesia is one of typical examples mentioned by business representatives and international organizations at the Vietnam Business Forum (VBF) as one of the main competitive markets in drawing foreign investment inflows.

“Bigger population plus better growth during the economic crisis along with the more favourable factors for business activities are important reasons that are making many investors consider the transfer of investment capital to Indonesia” Alain Cany – Chairman of the European Chamber of Commerce in Vietnam (Eurocham) said on the sidelines of the event held in the morning December 2.

Even in the report presented at the forum, Mr Alain Cany also showed many worried figures when Vietnam’s business confidence index quarterly (BCI) conducted by Eurocham reduced from 78 to 52 points within a year. In addition, Vietnam’s inflation is approaching 20%, the country also dropped eight spots in the World Bank’s report on “Business Environment 2012″ and Vietnam’s foreign direct investment (FDI) attraction fell 28% in the first nine months this year. “This trend will likely extend into 2012 due to the impacts from the global economic difficulties” Eurocham’s representative warned.

These projections that are not very bright are also reflected in the official report on the business environment of the forum. Presenting the report, President of Vietnam Chamber of Commerce and Industry (VCCI), Vu Tien Loc admitted, 2011 was a particularly difficult year for Vietnamese enterprises as well as foreign investors.

“The most heated issue is still the difficulty in accessing capital due to the central bank’s tightening monetary policy. Many companies have been or are on the brink of default or bankruptcy while the others are moderately operating” Mr. Loc said.

Lawyer Tran Anh Duc, a member of VBF, also said that some companies are trying to call the foreign investment capital by issuing international bonds. However, recent regulations allow only profitable companies for three consecutive years to issue bonds. Meanwhile, due to economic hardship few local businesses can meet these requirements.

Together with the capital problem, the issue of macroeconomic stability (inflation, the forex rate) is attracting more interest of many businesses when it is ranked in the group of three most worrying sectors of the business environment 2011 for the first time after being appreciated for several consecutive years.

Members of the Forum also said the number of 69% of surveyed enterprises said they would expand business in Vietnam in the next three years is relatively optimistic, although this number decreased sharply compared with 76% of 2010. In addition, 2.31% of asked businesses said they would reduce the scope of business and one vote said it will shut down operation. All these surveyed companies are local firms and most of them are operating in service sector.

To improve the confidence of investors, VBF proposed Vietnamese Government to expeditiously conduct the programs of stability and restructuring for the economy, at the same time have specific for the business community. The top priority, according to VBF, is to continue to improve, simplify the administrative procedures and improve the information system, energy and transport infrastructure. In addition, the government should reduce barriers for the market participants and more equitable treatment for all types of enterprises. – Vietbiz24

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

Posted by VBN on Dec 6 2011. Filed under Investment. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry