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The lure of Vietnam

Very often investors have been warned of many a pitfall and hurdle. Critics have cautioned that Vietnam is not an Eden for capitalists, citing how labyrinthine the bureaucracy is, and opaque its legal system. Corruption, they say, is a big problem and taxes too high and subjectively applied. Maybe they are ‘health warnings’, yet despite all the dissuasion, competition has been increasingly fierce on the investment front.

As recent developments have shown, Vietnam is an economy in transition. Canon and Intel, for instance, are investing heavily in facilities in Vietnam, an “up and coming” IT destination. Of course, corruption and non-transparency of the bureaucracy remain problematic, Prime Minister Nguyen Tang Dung has been
listening and made it a top priority to resolve the issue. The year 2007 has been made a key year for reforming public administration, including reducing the implications of red-tape for foreign business interests.

• Basket vendor walks past
electronics shop in Hanoi

Over time, the Enterprise Law and Investment Law (2005) should help improve business conditions as it is expected of a WTO member. A law on the securities market, that came into force in January 2007 provides the legal basis for investor protection and market transparency, including disclosure requirements for publicly held companies. Maximum foreign ownership limits in listed companies have been lifted from 30 percent to 49 percent.

Thanks to WTO membership, Vietnam’s tariff structure is undergoing significant changes, with average tariffs declining from a current rate of 17.4 percent to an average final bound rate of 13.4 percent. Most tariff cuts are scheduled to take place over the next five years. Besides, the WTO accession has opened greater opportunities for exporters and manufacturers as the country becomes eligible for most-favoured-nation treatment and it is no longer subject to quotas. Irresistible it is for investors in the Asean region and beyond. Vietnam
will soon be presenting them with a wish list of 136 pre-planned foreign direct investment (FDI) opportunities eligible for bypassing lengthy application procedures.

Priority would be given to projects that improve the infrastructure and the service sector, according to the Foreign Investment Agency (FIA) under the country's Ministry of Planning and Investment.

Prioritised projects in infrastructure development include 16 new expressways, two railway routes, six airports, seven seaports and at least 10 new urban centers. The wish list also includes 20 resorts and recreational facilities for foreign investors to step into. They include facilities in the World Heritage site of Ha Long Bay, the central highlands resort city of Da Lat and the southern island of Phu Quoc. The wish list was part of Vietnam's ambitious plan to attract $24 billion in FDI in 2010.

Vietnam FDI update
According to the Foreign Investment
Department under the Ministry of
Planning and Investment, the country
attracted over $9.6 billion in foreign
direct investment (FDI) in January-
September 2007, up 38 percent over
the same period last year. The Republic
of Korea maintains its leading status
among 47 foreign investors in Vietnam
with a registered investment of $2.1
billion, making up 25.4 percent of the
total. Singapore came in second with
$1.3 billion or 16.6 percent of the total,
followed by the British Virgin Islands
with $1.2 billion, Taiwan with $629.7
million. Japan took over the fifth
position from India by pouring in
$623.1 million. Newly-licensed projects
averaged $8 million a project against
$7.01 million recorded in the same
period last year. The top 15 projects
alone accounted for 45.7 percent of the
combined investment of the 1,045
newcomers. Major investments were
mostly poured into the heavy industry
and real estate development such as
construction of hotels or office and
apartment buildings for rent. Of the 64
cities and provinces nationwide, 50
have managed to attract FDI projects.
Ho Chi Minh City led the nation with
$1.1 billion in FDI while the oil-rich Ba
Ria-Vung Tau province ranked second
with $1.06 billion. Hanoi took the third
place with $864 million and Binh
Duong, the fourth, with $634 million.
To meet a target of $13 billion in FDI
for 2007, the Foreign Investment
Department is focusing investment in
vocational training to meet investors’
demands for high-skilled workforce.
Last year, total approved FDI reached $
10.2 billion, of which $ 7.8 billion was
for new projects and $ 2.4 billion for
the expansion of existing projects.

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