Foreign investors undeterred by Vietnam’s economic difficulties

Despite soaring inflation and a skills shortage, Vietnam is still one of the world’s most attractive investment destinations, a conference has heard.
Skyrocketing inflation and other challenges facing Vietnam’s economy were yet to diminish the amount of foreign investment flowing into the country, a conference in Ho Chi Minh City heard Thursday.

Phan Huu Thang, head of the Foreign Investment Department, said there was no sign of decreased foreign investment in Vietnam, with many new international groups expressing interest.

The government was expecting billions of dollars of new foreign investment this year, Thang told the European Chamber of Commerce in Vietnam (EuroCham) conference, which attracted the CEOs of about 80 European businesses.

EuroCham members have ranked Vietnam as one of the six most attractive destinations for foreign investors, he said.

However, EuroCham Chairman Alain Cany warned Vietnam was facing the dual difficulty of soaring inflation and the appreciation of dong against the US dollars.

Cany said he was convinced the challenges would be addressed in the short haul.

Many of the delegates to the conference shrugged off concerns Vietnam’s rising inflation would discourage foreign firms, saying long-term investors would press ahead with their business plans.

But Jagdeesh M.Mehta, president of Essar Vietnam Steel Corp., admitted soaring inflation was hitting his business in the stomach, increasing costs by about 20 percent.

The dearth of qualified personnel, coupled with restrictions on the number of foreign staff allowed, was also causing delays on some of the company’s projects, Jagdeesh said.

Many foreign contractors have resorted to scrapping their projects due to the increasing cost of construction materials and land lots, lawyer Fred Burke of the Baker & McKenzie law firm told the conference.

Fading HR advantages

Rising wages and a shortage of competent managerial personnel meant Vietnam was also losing its competitive advantage of a young and cheap labor force, the conference heard.

EuroCham member Mark Van Den Assem said it was difficult to install young employees into managerial posts.

Young personnel were usually not confident enough to take over managerial posts, he said, while subordinates doubted their capabilities.

Despite the lack of experience of young Vietnamese personnel, Chen Chi Young, head of the Taipei’s Economy-Culture Bureau in Vietnam, said the country’s labor force was still ranked first in terms of quality in the Southeast Asian region.

Delegates called on the government to crank up training opportunities for the nation’s workforce so it could better compete with markets such as China and India.

Foreign investors pointed out the shortcomings of domestic workers while at the same time praising the nation’s young and dedicated labor force.

ABOUT EUROCHAM

■ The European Chamber of Commerce in Vietnam, known as EuroCham, was founded in 1998 to promote European business issues.
■ As the voice of the European business community in Vietnam, EuroCham represents corporate members on pan-European issues of common interest. The group’s mission is to lobby Vietnamese and EU authorities on industry issues raised by both EuroCham and European national business groups as well as to facilitate trade between Vietnam and Europe.