Vietnam in Focus
By James Mulligan, Weekender.com
 

From the morning market in Sapa to bilateral trade agreements with the U.S., Vietnam is sharpening its business teeth. Is it the next Asian Tiger? Tokyo Weekender gets the lowdown from Christopher W. Runckel. Tokyo Weekender: Even SARS-free, will Vietnam suffer from long-term effects on foreign investment and business projects due to the disease? Christopher Runckel: Vietnam's tourism industry along with that of Thailand and much of Southeast Asia has been greatly affected by fear of SARS.

The effect on industrial production has been much less but most countries in Southeast Asia including Vietnam have had their economic growth projections reduced by one percent or more. This figure translates into hundreds of thousands of jobs, less tax revenue and lesser payrolls.

The effect therefore has been real and hard on individuals but I believe the effect will be largely limited to this year as long as governments in the region such as Vietnam continue to demonstrate the vigilance on SARS that they have shown to date.

TW: What do you see as the most profitable sectors for foreign investors to become involved in?

CR: Vietnam is still in transition from a state-controlled to a market-controlled economy. In this situation, the opportunities for investment are changing and an investor needs to continue to research and look for opportunities and to compare these to opportunities being offered in other countries in the region.
 

Already Vietnam has proved itself an attractive location for production of shoes, textiles, handicrafts, food items and seafood. For example, Ho Chi Minh City's textile and garment exports were estimated at US$57.5 million in April, up nearly US$1 million against those in the prior month. Meanwhile, its seafood exports reached US$15.2 million in April, or a 10.8% increase compared with the March figure. In 2003, Vietnam has made a concerted attempt to attract more light industry by allowing local authorities to approve business licenses and other changes to speed up investment. Vietnam wages are low and quality of work is extremely good. Light industry such as toys, metal fabricated goods, etc. that require a larger labor component and that compete aggressively on the basis of cost may find Vietnam a good choice for a new factory. TW: When do you think Vietnam will be in the WTO? What reasons can you give for this forecast? CR: Hanoi has set an ambitious target date for membership of 2005. Although I don't know whether Vietnam can meet this target, it is obvious that China's recent entry into the WTO has further spurred government efforts toward accelerating change in the economy and that this change is promoting further economic development and trade. The increase in Vietnam-U.S. trade is also showing the benefits of increased openness and for these reasons I am certain that Vietnam will continue to push aggressively for WTO membership. TW: What can Vietnam offer that China doesn't in terms of setting up business there? CR: Vietnam offers many niche market opportunities that can compete with China. Vietnam labor costs can be as cheap and sometimes cheaper than in China. Quality of workmanship is as good as and often better than in many regions of China. Local governments in Vietnam have fully realized that they need to do more to encourage investment and many are revising old policies to better attract investment. One thing I have learned in more than 30 years experience with Vietnam is to never underestimate that Vietnam will continue to improve as a site for investment and any investor should certainly evaluate it and compare it with China, Thailand and many other sites. If they do, I think they may be surprised at the advantages it may offer the right project.

Country Information Country Name: Socialist Republic of Vietnam Main Languages: Vietnamese (Official), English (Increasingly favored 2nd language)   Population: 80 Million Capital: Hanoi Political Party: Communist Party of Vietnam Currency: Dong ($1= 14,512 VND, ¥100= 12,400 VND) GDP Growth Rate (2002): 7.24%. Vietnam is the only country in Asia with an average growth rate of 7% over the last 15 years. It has been as high as 9% and as low as 4.5%. Tourism: Japanese tourists to Vietnam have tripled in the last three years Vietnam's major exports Crude oil Marine products (e.g. seafood) Rice Coffee Rubber Tea Garments and shoes Vietnam's major imports Machinery Petroleum Steel Fertilizer Cotton Grain Cement Motorcycles Major Export Partners U.S. Japan China Australia Singapore Taiwan Germany Due to the U.S. and Vietnam signing a Bilateral Trade Agreement in December, 2002, the U.S. is now Vietnam's largest export market. In the first four months of 2003 following the agreement, Vietnam's exports to the U.S. jumped 238 percent, with seafood exports to the U.S. growing to $230 million. Japan also continues to be a major market. Information taken from Runckel & Associates websites: www.business-in-asia.com  www.business-in-vietnam.com

Christopher W. Runckel is President and Principal of Runckel & Associates. They assist companies interested in investing, manufacturing or opening an office or factory in Asia.

Runckel worked in President Ford's White House as Deputy General Counsel of the Presidential Clemency Board. He was also the first permanently assigned U.S. diplomat after the Vietnam War. In 1997 he was awarded the U.S. Distinguished Honor Award, the highest U.S. Award for diplomatic service.