ASEAN KEY DESTINATIONS
Foreign investors say Vietnam still lags
Overloaded infrastructure, excessive bureaucracy and corruption are just some of the problems investors cite.
The hopes and promises of the early 1990s, when the communist nation abandoned a planned economy for the laws of the market, have not been realized.
"Most investors agree that Vietnam has huge potential," says Adam Sitkoff, executive director of the American Chamber of Commerce Vietnam (AmCham).
"However, the country is struggling to live up to its full potential, hindered by slow progress on a list of perennial barriers to investment."
Over the past two decades Vietnam has been among Asia's fastest-developing countries, with average annual growth of 7.1 percent between 1990 and 2009, according to the Asian Development Bank.
With a per capita income of about $1,200, the nation of 86 million people is now a "middle-income" country, according to World Bank criteria.
But Vietnam remains far from resembling Taiwan, Singapore or South Korea, whose fast growth earned them the label "Tiger" economies, and whose success it dreams of emulating.
The country "risks falling into the 'middle income trap', the inability to arise out of an economy based on cheap labour and low-technology manufacturing methods," said Matthias Duhn, executive director of Eurocham, the European Chamber of Commerce in Vietnam.
The warnings come just before a five-yearly Communist Party Congress, expected in mid-January.
A gathering as opaque as it is fundamental, the Congress will determine key political posts for the next five years, as well as the country's main "economic themes", said Benoit de Treglode, director of the Research Institute on Contemporary Southeast Asia (IRASEC) in Bangkok.
The international community has stepped up reform calls in the weeks before the congress, hoping they would be heard by the top leaders, he said.
Foreign business leaders re-emphasized their concerns on Thursday at the biannual Vietnam Business Forum, held by the World Bank and Vietnam's Ministry of Planning and Investment.
They urged infrastructure development, upgrading workers' skills, streamlining bureaucracy and other reforms.
The chairman of AmCham also told the forum that Vietnam has violated its World Trade Organization commitments with a new price control law targeting overseas firms.
Some officials close to the regime admit the need for reform.
"Too much attention has been given to the increase of investment rather than that of quality, productivity, efficiency and competitiveness," Tran Tien Cuong, of the Central Institute for Economic Management (CIEM), was recently quoted as saying in the state Vietnam News.
Eurocham cites estimates that Vietnam needs around $70 to $80 billion of investment in road, rail and seaport infrastructure in the next five to 10 years.
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