Long-term business plans and sound finances have helped many foreign invested enterprises reap healthy profits in Vietnam this year.
Kiyoshi Sato, deputy general director of Japanese-backed Makoto Sangyo Vietnam, said despite the country's economic woes, the company's 2013 revenue from electronics product sales was expected to grow 30-40 per cent against last year. An identical rate was also expected in 2014.
Japanese-invested precision engineers IIYAMA Seiki Company's president, Tadashi Terasaka was also upbeat over Vietnam's economic prospects, claiming that IIYAMA Seiki had established a factory in the northern port city of Haiphong in June 2013.
"We are planning to expand this factory to sell products domestically and for export to China. We'll be able to manufacture 30,000 products a month," Terasaka told VIR.
Both Sato and Terasaka underlined their long-term access to capital and business plans which obviously included careful market research that indicated growing demand for their products. They also said their performance had not been particularly affected by Vietnam's economic problems which they considered to be a short-term issue.
Pham Vu Hai, director of the Northern Investment Promotion Centre under the Ministry of Planning and Investment's Foreign Investment Agency, said the two firms were typical of many foreign invested enterprises (FIEs) performing well in Vietnam this year.
"FIEs can ride out difficulties as they have business experience, solid networks and no problems accessing finances. Unsurprisingly you can see they are outdoing local enterprises, especially in the export sector," he told VIR.
Operating in Vietnam since 2004, the South Korean-backed garment maker KJ Vina in the southern province of Binh Duong has seen its export revenue grow by an average 15-20 per cent on-year. The 1,600-employee company's investment is fed by its parent company in South Korea and its products are exported to the US and Canada.
The General Statistics Office reported that the country's total 11-month export turnover reached $121 billion, up 16.2 per cent against the same period last year. Locally-owned enterprises were responsible for $39.9 billion, up just 3.6 per cent on-year. Meanwhile, FIEs racked up $81.2 billion in turnover (including crude oil exports), up 23.5 per cent on-year.
Nguyen Viet Ha, managing director of the US-backed investment consultant Bower Group Asia Inc, told VIR that almost all FIEs in Vietnam had stayed afloat amid economic difficulties, which was in stark contrast to local firms.
"FIE business plans are often well-prepared with a long-term vision, in which all risk possibilities have been taken into account. FIEs also have good financial health fuelled by overseas banks which can help them ride out market changes. For example, during 2011 and 2012 the annual average lending rate of 20 per cent in Vietnam barely affected FIEs, but local firms suffered," Ha explained.
It is expected that Vietnam would likely attract over $21 billion in foreign direct investment (FDI) this year, far higher than last year's $13 billion. However, Ha warned that FIEs were being hit by a 10-15 per cent rise in labour costs for skilled employees, and the Philippines, Myanmar and Cambodia were becoming rivals in terms of FDI attraction.
"Vietnam's tax and land incentives remain limited and administrative procedures and site clearance problems still plague the country," she said.
Echoing her view, Seiki said it had taken nearly one year for his company to be licensed and be allocated a manufacturing site, while it would have taken just a week to complete in Japan.
By Nguyen Thanh – Vietnam Investment Review
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