By Dezan Shira
More and more small and medium-sized Thai and Indian businesses are looking for investment opportunities in Vietnam.
There are many reasons why Vietnam is attractive for foreign investors. According to Tharabodee Serng-Adichaiwit, general manager of Bangkok Bank in Vietnam, in comparison to Thailand’s other bordering countries like Laos and Cambodia, Vietnam has a large market, skilled workers and a good investment environment while still maintaining lower production costs due to lower wages then in India or Thailand.
Some 1,000 clients of Bangkok Bank want to invest in Vietnam, but on the last assembly of Thai firms with Becamex IDC Corp. the bank chose to bring not more then 37. Tharabodee assume that at least 10 percent of the companies are going to invest in Vietnam and more businesses are expected to follow this year. Five companies signed already a contract to lease land at Becamex IDC’s industrial park this year. All in all, Thai companies invested more than US$5.8 billion in 244 projects in Vietnam.
Indian companies are also planning to invest more and more money into Vietnam in the future. Two weeks ago, 62 Indian companies visited Vietnam to look for investment opportunities. One additional reason why Indian firms are getting more interested in Vietnam is the India- ASEAN (Association of Southeastern Asian Nations) Free Trade Agreement, decided on August 13, 2009 in Bangkok and effective from January 1, 2010.
The Vietnam-India bilateral trade relationship was worth US$2.75 billion last year. In January and February 2011 the bilateral trade value stood at US$643 million and it seems to be rising.
Vietnam’s economy in 2010 suffered major inflationary and currency devaluation problems. Consumer prices increased 13.89 percent in March of this year from the previous year, with expected increase in 2011 averaging 14.3 percent, compared to 9 percent in 2010. The rapid inflation is due to both higher prices of international commodities and downward pressure on the Vietnamese dong. The Economist Intelligence Unit estimates world crude oil prices to rise by 13 percent and food by 27 percent in 2011. Vietnamese policymakers have already increased electricity, petrol, and diesel prices by 15 percent, 17 percent, and 24 percent, respectively, in the first three months of this year.
A lack of confidence in the dong is also creating a national run on banks’ foreign reserves as the U.S. dollar makes up roughly 20 percent of the money used in transactions within the nation. The dong to dollar exchange is expected to depreciate from VND19,127:US$1 to VND23,873:US$1 by 2015. In October of last year, the International Monetary Fund estimated Vietnam’s foreign currency reserves at US$14.1 billion, which amounted to less than two months of imports. With such little in reserve and a continued trade deficit, the government is hard-pressed to find an easy resolution.
About the Author
This article was written for the Vietnam business news site, Vietnam-Briefing.com. The site is published by the Asia business guide publishers Asia Briefing, who also publish the Guide to doing business in China.
