East Sea tension not a deterrent to foreign investors

VietNamNet Bridge – The reports from well-known international consultancy firms all show that major investors still have interest in Vietnam as an attractive investment destination, despite the tensions in the East Sea.

HSBC, foreign investors, east sea tension

Vietnam’s Manufacturing PMI (purchasing managers’ index) released by the Hong Kong and Shanghai Banking Corporation’s (HSBC) has stayed above 50 points since December 2013, showing considerable improvement in business conditions recently.

The higher output and stronger demand can be seen as signals for the recovery of the national economy. A report showed that in June 2014, Vietnam once again witnessed two-digit export growth rate, though the growth had slowed.

The production and service increases helped the GDP rate grow by 5.5 percent in the second quarter over the same period of last year and by 4.8 percent over the first quarter of the year.

The tensions in the East Sea have only had influences to some branches of the Vietnam’s economy. Analysts said tourism proves to be the industry which has most suffered with the number of Chinese inbound tourists down, but they predicted that things would return to normal in several more months.

Though the number of Chinese tourists has decreased, the number of foreign tourists to Vietnam still rose by 26.1 percent this year, while Vietnam hopes the increase would be sharper in the time to come and stimulate the retail industry.

The biggest long-term problem of Vietnam is the organization of supply chains. At present, many industries of the country, including garment and textile, footwear and electronics, still depend on input material imports.

If the Trans Pacific Partnership Agreement (TPP) is signed, Vietnam is believed to be the biggest beneficiary among TPP members. However, in order to enjoy the TPP’s preferences, Vietnam would have to adjust its business strategies to reduce reliance on  import materials from China.

HSBC’s experts believe that the problems that Vietnam needs to settle to join TPP and the temporary tensions in the relations with China will force the country to speed up economic restructuring.

Prime Minister Nguyen Tan Dung has decided that the equitization of 432 state-owned enterprises must be completed by 2015.

HSBC believes that inflation will be stable, while the State Bank will keep the prime interest rate at five percent per annum.

A report by the Foreign Investment Agency (FIA) showed that foreign direct investment keeps flowing into Vietnam, which means that major investors in the world have not changed their stand about Vietnam, believing that Vietnam remains an attractive investment destination.

The major investors include Japan, South Korea, Singapore, Taiwan, Hong Kong and the US.

South Korea topped the list of the foreign direct investors in the first six months of the year, with $1.55 billion worth of registered capital.

A recent survey by Amcham (American Chamber of Commerce) in Shanghai found that foreign investors are showing special interest in Vietnam as an increasingly attractive investment destination.

According to FIA, 415 transnational corporations have invested in Vietnam, of which 106 are listed in the Fortune’s Top 500. Five-hundred projects of transnational corporations alone have total investment capital of $140 billion.

K. Chi

HSBC, foreign investors, east sea tension