Vietnam is seen as an attractive destination for foreign investors with an improved business environment and rising trade confidence index, according to several international organisations.

Trading environment improves remarkably

The Global Enabling Trade Index (ETI) Report 2010, released by the World Economic Forum (WEF) said that Vietnam’s ranking has jumped 18 places from 89th in 2009 to 71st in 2010, among 125 economies worldwide.

According to the WEF, the improvement in Vietnam’s trading environment reflects the fact that the country has kept the commitments it made when joining the World Trade Organisation (WTO) to open up its markets to goods and services. Under the regulations, tariffs in Vietnam are lower and domestic exporters have more opportunities to deal with other WTO members.

However, the WEF said that despite the good progress, Vietnam still needs to improve its customs procedures and the country’s infrastructure.

Vietnam’s efforts to improve its tax performance in recent years also helped the country to climb 10 places in terms of how effective its customs service is, added the WEF, however, the country is still ranked fairly low.

According to the WEF, the 2010 trade index underlines the concerns shown by foreign investors about the poorness of Vietnam’s infrastructure and the need to upgrade its transport network to boost trade with other countries worldwide.

Rising trade confidence index

The HSBC Bank recently announced that Vietnam was placed third among 17 countries and territories in the Trade Confidence Index (TCI) ranking, indicating that Vietnam is a highly attractive market and trusted by foreign investors. According to the TCI ranking from 0-200, Vietnam got 132 points, up by 22 over the previous survey, just behind United Arab Emirates (134 points) and India (133 points). However, Vietnam’s TCI is much higher than other economies such as Hong Kong or Singapore with 111 points. Apart from these countries, HSBC’s TCI also covers other economies such as Indonesia, China, Brazil, Mexico, the US, Germany, the UK and several Middle Eastern countries.

The results recorded in the survey conducted by HSBC are also similar to other indexes carried out by global management consulting firm A.T. Kearney. According to the 2010 FDI Confidence Index, Vietnam ranked 12th out of more than 80 countries to be the most trusted by the international investing community.

Despite coming behind China, India, Brazil, Germany and Poland on the list of the five most attractive investment destinations, Vietnam still tops the list of Southeast Asian nations, followed by Indonesia (19th), Malaysia (20th) and Singapore (24th). This year Thailand and the Philippines failed to make it to the top 25.

On the right track

Business Monitoring International (BMI) said that the rising foreign investment shows that Vietnam is on the right track in developing its infrastructure and improving its business environment.

In a report on the development of Vietnam’s infrastructure posted on the website companiesandmarkets.com on May 19,   BMI said that despite Vietnam’s business environment hovering around 50.8 points, like several other countries in the Asia-Pacific region, it has seen its infrastructure develop strongly.

Vietnam now has many major infrastructure projects in the pipeline.

In March this year, Prime Minister Nguyen Tan Dung approved US$18 billion to expand the highway network, including a plan to build 5,000km of new roads. In electricity, the Vinh Tan 3 Energy Joint Stock Company (VTEC) has been given permission to construct the biggest thermal power plant in the country with a total investment capital of US$2.5 billion. Construction will get underway in 2011 and the plant is expected to generate electricity by 2015.

The BMI estimated that Vietnam’s building industry would make VND126,000 billion this year and VND260,000 billion in 2014. 

Still attractive to foreign investors

At a seminar on foreign investment in Vietnam in the post economic crisis period, a representative of the European Chamber of Commerce in Vietnam (EuroCham) said the country’s market is still attractive to foreign investors.

Vietnam has many advantages, including a Gross Domestic Product (GDP) of US$103 billion in 2009, a per capita income of US$1,200, a stable political environment and a young population.

Foreign investment is acknowledged as an important additional source for development and meeting the demands of economic growth. This also contributes considerably to the state budget and macro-economy.

In the three consecutive years from 2006 to 2008, the foreign-owned sector contributed nearly US$5 billion to the state budget, an increase of 1.4 times compared to the 2001-2005 period.

The presence of foreign investors in Vietnam’s market helps to push through reform in the legal system and promote the transfer of technology.

At a conference on investment opportunities in Vietnam held in Yokohama, Japan on May 22, Saito Nobuo, a representative of the Japan-Vietnam Friendship Association, said that Japanese businesses feel safe about investing in Vietnam because the country has a stable political scene, a skilled workforce and a large market with population of over 80 million.    

Mr. Nobuo praised Vietnam’s economic growth in recent times despite facing difficulties arising from the global economic crisis.

He confirmed that trade between the two countries has contributed to a blossoming relationship.

According to the UK-based Business Monitor International (BMI), Vietnam holds an important position in South East Asia as, from its sea ports, foreign businesses could export goods to other countries in the region.

However, EuroCham’s representative noted that Vietnam needs to improve its road and rail network in the first place.

(VOVNEWS)