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Vietnam notches up new highs among foreign investors   2008-09-08 - Thanh Nien

A promising retail market, competitive labor force and a stable economy are among the reasons Vietnam has been able to attract record foreign investment inflows this year, says a Sacombank Securities Company report.

Titled “Vietnam – Rewards for the Cool-headed,” the report says the economic situation in the country has “fundamentally improved” recently and the confidence of investors has been “significantly restored.”

With a population of over 82 million, Vietnam is an attractive market for many kinds of goods and services.

A recent study by management consulting firm A.T. Kearney finds Vietnam’s retail market the most promising in the world.

The demographics of its labor force is another advantage.

More than 50 percent of the population is under the age of 25 and the number of well-trained and educated workers keeps increasing.

The average wages for Vietnamese workers are among the most competitive in the region - about two thirds of those in Indonesia, the Philippines and China, half of Thailand and much lower than Malaysia.

Vietnam’s growth fundamentals also “remain robust,” the SBS report says.

The infrastructure, for example, is being greatly improved, with several new highways, industrial parks and export processing zones being built.

The company says Vietnam has experienced many difficulties with inflation and a ballooning trade deficit this year, but the situation has improved significantly in the last couple of months.

In August, for example, the consumer price index (CPI) rose by 1.56 percent month-on-month, according to the General Statistics Office.

Although the figure was higher than the 1.13 percent increase in July, the lowest this year, it was lower than the 2.14 percent in June and 3.91percent in May.

In a report last month, Standard Chartered Bank said with Vietnam’s imports dipping and exports remaining strong, the government’s full-year trade deficit target of US$20 billion could be achieved.

Also last month, the index of Vietnam’s stock market, VN-Index, rebounded 20 percent, the biggest monthly gain of the benchmark index since February 2007, making Vietnam’s stock market the world’s best performer in August.

Vietnam has long been considered a friendly environment for foreign investors, the SBS report says.

There have been many privileges granted to investors including tax breaks, and reasonable land rentals, especially in priority investment areas.

By the end of August 2008, the total FDI registration into Vietnam had reached over $47 billion, surpassing the most optimistic projections for the year.

Along with the registered figure, FDI disbursement has also continued to advance.

Disbursement of foreign direct investment reached a record high following more inflows in August.

Phan Huu Thang, director of the Foreign Investment Agency, told Thanh Nien Daily last month that the disbursement figure for the first eight months had gone up to $7 billion.

The full-year amount is expected to reach $11-12 billion, he said.

Last year, the disbursement was around $4.6 billion on a commitment of $20.3 billion.

Thang noted that the gap between the disbursed and registered amounts is because it takes a long time for large projects to get off the ground.

Most of the largest foreign investors in Vietnam are Asian neighbors, with top-ranked Taiwan having more than 1,700 projects in various sectors.

Singapore has the highest registered capital of approximately $10 billion.

South Korea, Japan and Hong Kong make up the rest of the top-five list, the report says.

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