A Japanese chip plant in Ho Chi Minh City. Photo courtesy of Vietnam News Agency
Economies in Vietnam's neighborhood are growing and distracting foreign investors’ attention from the country, a survey has found.
The survey done by the Vietnam Chamber of Commerce and Industry (VCCI) and the US Agency of International Development (USAID) of 1,609 foreign businesses found that last year 54 percent of them had considered investing in China, Laos, Cambodia, or Myanmar before choosing Vietnam, up from 32 percent in 2011 and 2012, news website VietNamNet reported.
The VCCI and USAID warned that Vietnam is no longer a priority destination unlike in the 2007-2010 period.
While China, Thailand, and Cambodia have been Vietnam’s traditional rivals, for the first time it also faces competition from Laos, the Philippines, and Myanmar.
Around 64 percent of the foreign investors value Vietnam for its low risk of
expropriation, low taxes, and stable policies.
They said its value-added tax of 10 percent and corporate income tax of 23 percent are on par with rates in many economies in the region, and lower than the 25 percent corporate tax in mainland China and 30 percent in the Philippines.
Thailand imposes 18 percent and Taiwan, 17 percent.
But its disadvantages are unofficial costs, red tape, tortuous regulations, and poor quality of infrastructure and public services.
They ranked Vietnam’s infrastructure on a par with that of Cambodia and Laos, and its corruption and legal complications as worse.
The VCCI said corruption is undermining businesses’ respect for the law.
In some sectors, competition from neighboring countries is already a reality.
A recent statement from the Vietnam National Administration of Tourism said Vietnam's tourism growth rate and promotion have fallen behind that of Laos and Cambodia, with no local travel agent having an office abroad.
Insiders said Vietnamese firms do not make good use of international events to market themselves, and authorities have failed to prevent problems like vendors ripping tourists off and the like.
Cambodia has also gone ahead of Vietnam by investing to produce high-quality rice, threatening the former’s position as the world’s leading rice exporter.
Agriculture professor Vo Tong Xuan said Cambodian companies only export a few thousand tons of rice annually compared to Vietnam's hundreds of thousands of tons, but their grains are of high quality and have brand names.
Not having brands would become a big challenge for Vietnamese rice, he warned.
Cambodia, which ranked 125th with over $14 billion in the World Bank’s 2012 GDP (gross domestic product) ranking compared with Vietnam's 62nd with US$155.82 billion, recently also shocked the world by unveiling its first locally made electric car, Angkor EV 2014.
Economist Alan Phan, chairman of the Hong Kong-based private-equity fund Viasa, said the US$5,000 car is likely to cost $4,000 to make, which is close to that of large assembly lines.
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