Hong Kong investors looking to
Vietnam By Olivia Chung
HONG KONG - Capital flows to where the
profits are. As taxation and production costs
increase on mainland China, more Hong Kong
enterprises are eyeing Vietnam for investment
opportunities following the Southeast Asian
country's accession to the World Trade
Organization (WTO) in January.
In order to
capture the fresh business opportunities, Peter
Woo Kwong-ching, chairman of the
government-affiliated Hong Kong
Trade Development Council
(TDC) led a 17-member Hong Kong business
delegation to Vietnam on June 18-21. The TDC
delegation, with representatives from Hong Kong's
clothing, jewelry, financial, logistics and
electric appliance sectors, visited Hanoi before
going to Ho Chi Minh City.
In Hanoi, the
delegation met with Vietnam Prime Minister Nguyen
Tan Dung, who said overseas investment was an
integral component of Vietnam’s economic
development and his government would provide
favorable conditions for Hong Kong investors,
particularly in the financial, banking, insurance,
securities, shipping and manufacturing sectors.
Earlier, the delegation was briefed by
Vietnamese Minister of Trade Truong Dinh Tuyen and
Vice-minister of Planning and Investment Nguyen
Bich Dat on the latest developments in Vietnam,
including laws recently introduced to create a
more effective business environment in the
country.
Woo said Vietnam's competitive
labor force and its competitiveness as a
manufacturing base, particularly for garments and
electronics, have drawn attention from Hong Kong
businessmen.
Trade between Vietnam and
Hong Kong in January-September, 2006, grew 19.5%
to US$2.1 billion. In the same period, Vietnam
absorbed more than US$600 million foreign direct
investment (FDI) from Hong Kong, which was the
largest among all foreign investments in the
country.
Light-industry manufacturing and
real estate, such as hotels and commercial and
residential buildings, seem to be Hong Kong
investors' favorites, jointly accounting for over
75% of Hong Kong FDI between 1998 and 2005,
according to a TDC study on Vietnam.
The
study said that Hong Kong companies should
consider investing there due to its growing access
to the world’s top trading nations, especially the
US. Foreign investment in Vietnam continues to
grow unabated. Last year, the country attracted a
record US$10.2 billion. In the first five months
of this year, the country attracted US$4.28
billion, 18.7% up from the same period last year.
Its government expected up to US$20 billion to
come in this year.
In March, Vietnam's
government said that the country's economy had
expanded 7.7% in the first quarter, up 7.2% from
the same period last year. Overall, the country's
economy grew 8.2% last year, and its government is
targeting growth this year of 8.5%
Vietnam’s deputy prime minister Nguyen
Sinh Hung told the World Economic Forum on East
Asia on June 24 that the country looks set to
sustain economic growth of between 8% and 10%
yearly till at least 2020.
Hung said the
country’s economy is expected to double by 2010
from 441.6 trillion dong in 2000, and that will
increase twofold by 2020.
Dao Quoc Khanh,
commercial consul of the Vietnam Trade Office in
Hong Kong, said Vietnam's economic growth is
sustainable as the communist country attracts more
foreign investment with plans to cut taxes and
amend laws such as enterprise law and investment
law.
He said the country has a
cost-competitive labor force; the monthly salary
of low-skilled labor is at least US$100, higher
than the minimum salary level of US$70.
“Of a total population of 86 million in
Vietnam, 75% are youngsters who have received a
better education, particularly those with a
university degree can speak English, which can
help solve the communication problem where
foreigners are concerned,” he said.
Hong
Kong-listed automobile equipment manufacturer
Zhongda International Holdings is setting up its
first overseas plant for the production of truck
chassis and special purpose vehicles in a US$60
million joint venture with the state-owned vehicle
manufacturer, Vietnam Motors Industry.
“The Vietnamese government invites us to
manufacture vehicles after knowing that we can
make good value-for-money ones, which also can
meet the standard requirement for vehicles in
Vietnam,” said Allan Kwok, executive director of
Zhongda, which has been selling car maintenance
equipment in Vietnam for more than five years. The
annual production capacity of the joint venture is
5,000 buses, 20,000 framed chassis with engine and
10,000 bare chassis.
The Vietnamese
government intends to turn auto manufacturing into
a pillar industry, and Kwok said the potential
market for the automotive and parts industry is
great. In Vietnam, vehicles including passenger
cars are mostly second-hand or assembled there
with imported parts. But the prices are not cheap
and supplies aren't stable due to the necessity of
importing part.
“The market is huge for
the first vehicle manufacturing company in
Vietnam, Kwok said. Part of the reason is because
transport companies seldom switch to other vehicle
manufacturers once they make the first orders, he
added.
Zhongda is still talking with a
provincial Vietnamese government about further tax
cuts, such as tax holidays. The plant will be set
up in the special economic zone (SEZ) covering
China’s Guangxi province and part of Vietnam. At
present, taxes for vehicle assembling companies
and vehicles manufacturers in Vietnam are 18% and
10% resepectively.
One prime concern for
Zhongda is the poor Vietnamese road system, but he
said the government has promised to improve the
national infrastructure. “A 'highway' in Vietnam
can be a single-lane road for two-way traffic ...
but the government has pledged to make
improvements, for example: build an expressway in
the SEZ. We hope it can start soon,” he said.
Another Hong Kong company, listed
construction giant Chun Wo Holdings, is also in
Vietnam, working on a multi-purpose property
development project in Ho Chi Minh City. Eddie
Yeung, director of Chun Wo, said the company
invests in Vietnam due to the company’s desire to
diversify, the close proximity to China and the
positive economic outlook.
“The local
partner we have been working with is great,” Yeung
said. “They have given us very useful advice on
designing residential flats and consumer tastes in
Vietnam. Our presale flats have attracted an
enthusiastic market response,” he said. “It's not
easy to find a good local partner, so we are
thinking of working with them again on any new
projects,” said Yeung, who described a good local
partner as “a walking stick” for his company in
exploring the new market.
The demand for
property development in Vietnam is strong, Yeung
said. He and Kowk said the country is much like
China in the late '70s and early '80s, with many
opportunities, including a large, competitive
lower-paid labor force, for investors to get the
first slice of a potentially huge market.
Olivia Chung is a senior Asia
Times Online reporter.
(Copyright 2007
Asia Times Online Ltd. All rights reserved. Please
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