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Vietnam, a new dynamo in Southeast Asia after its WTO entry

A new Hong Kong Trade Development Council (TDC) study on Vietnam advises that Hong Kong companies should consider investing there following the country's accession to the WTO.

Total trade between Vietnam and Hong Kong in the first nine months this year increased by 15.3% to US%1.5 billion. In the same period, Vietnam absorbed over US$630 million FDI from Hong Kong, which was the largest among all foreign investments in the country.

The report refers to the advantages of investing in markets besides the Chinese mainland.

The study cites Vietnam as a market worth considering for the following reasons:

  • Its growing access to the world's top trading nations, particularly the US;
  • Its inexpensive labour,
  • Its expected accession to the WTO in the next few months,
  • Its buoyant economy; and
  • Its competitiveness as a manufacturing base, particularly for garments and electronics.

Vietnam is also emerging as a retail market because of the rapidly growing purchasing power of its high-income consumers, a development that provides a market for Hong Kong electronic products, gifts and premiums, jewellery, textile and apparel products, timepieces and toys.

On the services front, Vietnam offers a niche for Hong Kong's financial services, infrastructure and real estate services, logistics services, such as international freight forwarding, professional training and information and communications technology (ICT).

The TDC study notes that foreign investment in Vietnam continues to grow unabated. Last year alone, the country attracted a record US$6.3 billion worth if FDI (Foreign Direct Investment), 50 per cent up on 2004.

Light-industry manufacturing and real estate, such as hotels and commercial and residential buildings seem to be Hong Kong investors' favourites, jointly accounting for over 75 per cent of Hong Kong FDI between 1998 and 2005, the report says.

Vietnam has ambitions of being a world-class tourism centre. It aims to attract six million visitors to the country each year by 2010. But at present, it has only 124,000 rooms in mainly small hotels and other lodgings to accommodate its visitors. There is, therefore, an urgent need for better and bigger hotels.

Quality office accommodation and residential buildings too are in short supply in the big cities.

Vietnam is investing heavily in its logistical infrastructure. Three mega corridors, namely the East-West, North-South, and Southern corridors will be completed in 2008 to link different parts of the country to Laos, Cambodia, Thailand and Myanmar.

It also plans to build an expressway to link Haiphong and Kunming to boost border trade between Vietnam and China as well as to step up socio-economic development in the Mekong sub-region.

However, the report advises Hong Kong companies to exercise caution when investing or setting up shop there. This is because economic power is still very munch in the hands of the state-owned and state-related enterprises, making Vietnam a complex market.

"It pays to be cautious," the TDC report adds.

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For press enquiries, please contact TDC's Corporate Communication at 2584 4333

 

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