Skip to: Content
Skip to: Site Navigation
Skip to: Search

Vietnam loses appeal to foreign investment amid economic woes

Vietnam, once seen as on its way to joining economic tigers Taiwan and South Korea, has seen foreign investment decline sharply amid labor problems, crumbling roads, and the global financial crisis.

(Page 2 of 2)

“We don’t fear strikes so much anymore,” ] company country manager David Lin says. “They’re just a nuisance. [But] there’s no way for business owners to solve problems in Vietnam." He adds that the company just had to find ways to cope the best they could.

Skip to next paragraph

Minimum monthly wages range from $67.6 to $91.7, depending on location, since October, according to a 2011 government proposal to help the labor force. Workers need more than twice the minimum wage to cover expenses and send money to parents in poorer rural villages.

Successive revaluations of the centrally managed Vietnamese currency since 2008, followed by chronic over reliance on imports, have made that currency the world’s second least valued, hurting firms that import materials but sell locally.

Spiraling land prices, difficulties getting bank loans, power outages, and lack of paved roads between factories and ports add obstacles to business. And foreign retailers say they are taking hits from the decline in consumer confidence.

What's the way forward?

The government is working to solve the problems, say analysts and business groups who meet with officials. Tariffs have already been cut and customs streamlined. The World Bank Group named Vietnam as one of the top 10 reformer countries in its Doing Business 2011 report.

“While challenges remain, the government has in recent years has implemented significant structural reforms that have enhanced the business environment,” says Tomoyuki Kimura, the Asian Development Bank country director for Vietnam.

Steelmaker Fabrication Technology has helped build its own road and pays its 250 workers well enough, teaching them new skills along the way, to keep things humming, says General Director Michael Stretton of Australia. But profits are down. “It’s just the unknown factors that you can’t control,” Mr. Stretton says.

Most firms echo that sentiment, with some eying Bangladesh, Cambodia, or India for cheaper labor, says Leo Chiu, consultant to the Council of Taiwanese Chambers of Commerce in Vietnam, which represents about 3,000 firms and 11.8 of all foreign investment, more than anywhere else overseas.

“Business people know where the money is," and as soon as they see it's gone elsewhere, they run for it, Mr. Chiu says.


Read Comments

View reader comments | Comment on this story