Vietnam satisfies Korean investors: survey
A majority of Korean companies are happy to operate in Vietnam thanks to a combination of tax benefits and a cheap but highly productive work force, a recent survey showed.
Some 93 percent of 217 Korean-invested companies in Vietnam said that they are highly satisfied with their local operations, the survey by the Korea Trade-Investment Promotion Agency (KOTRA) said.
About 70 percent said they would encourage other Korean companies to invest in the emerging market.
KOTRA conducted the survey Nov.-Dec. last year to assess Korean business performance, and disclosed the results on Monday.
Among the strongest points of doing business in Vietnam were the lost cost of labor, cited by 60 percent of the surveyees; high productivity, cited by 15 percent; and tax breaks, cited by 6 percent.
Support from the Vietnamese government was cited by 3 percent.
Optimism about the future of investing ran high among respondents, amounting to 71 percent, which is more than double the portion of companies doing business in China who were asked the same question last June.
Almost 40 percent of respondents who predicted improvement in management circumstances mentioned the fact that the country joined the World Trade Organization (WTO) last year.
About one-third of the respondents cited the country’s growing domestic economy.
“Vietnam’s accession to the World Trade Organization has boosted overseas investors’ expectations that it will open doors to increased trade and investment,” said Shin Nam-sik, head of KOTRA’s Foreign Investor Support Office.
Although Vietnam poses as a land of opportunity where it takes an average three years for Korean firms to make profits, they still need to assess risks.
“Most of the firms are optimistic about their businesses in Vietnam, but lack of information about Vietnam, communication problems and a sound governmental policy on foreign companies make it difficult to operate there,” said the KOTRA official.
However, investors warned that difficulties are inevitable at the initial stage.
More than one-third pointed to a lack of information and one-fifth cited communication problems.
Other issues included cultural differences and lack of guidelines on foreign investment.
Land of opportunity
Vietnam is considered the next emerging growth platform for many global firms as the country became the 150th WTO member.
The Southeast Asia’s second most populous country enjoys a rapid economic growth rate of about 8 percent annually with foreign direct investment recording more than $9 billion in 2006.
Companies like Korean steel maker POSCO and retail operator Lotte Shopping are set to make inroads in Vietnam to construct a plant and a large discount store this year, respectively.
POSCO plans to build a cold-rolled steel plant beginning October 2007 with an aim of completing construction by the end of 2009.
Lotte Shopping, in the meantime, will break ground for its first overseas Lotte Mart in Vietnam this year with the goal of opening it next year.
According to KOTRA, two-thirds of the Korean companies in Vietnam are in the manufacturing sector, especially in the textile and chemical businesses.
Firms picked Vietnam’s booming economy with rising domestic consumption as the No.1 reason for their investment in the country, while others chose Vietnam because it provides an easy export access route to third countries like the United States, Europe and the ASEAN countries.
Finally, Korean companies picked cheap labor as the No.3 reason why they were attracted to Vietnam.
Korean companies invested an average $12.4 million to make inroads to Vietnam where, they say, it takes less than a year or six months to build a factory and make it fully operational, and an average three years to make profits, KOTRA said.
Sales of Korean-invested firms hit $1.1 billion in 2005, up about 11 percent from the year before.
“This is largely attributed to their brisk exports to third countries and Vietnam’s bolstering economy,” said a KOTRA official. |
