US investors interested in business expansion in Vietnam

After unveiling its Haswell central processing unit (CPU) in 2014, Intel said the first Ho Chi Minh City-made CPU has shown Vietnam’s potential in the field of technology. 

Haswell is Intel's codename for the fourth generation of processing chips found in nearly every laptop, desktop and mobile phone. 

The company plans to produce 80% of CPUs for the global market in Vietnam by mid-2015, Sherry Boger, general director of Intel Products Vietnam, said. 

In preparation for the expansion, the company has sent 105 Vietnamese engineers to its Malaysian factory for training. 

Intel is just one of many US companies to increase investment and expand production in Vietnam.

Last November clothing company Hanesbrands opened its third factory in Vietnam. The US$15 million plant is expected to hire 5,500-6,000 workers. 

Oil and gas giant Exxon Mobil Corp is preparing to make a massive investment in a gas-fired power complex in Vietnam. 

Do Van Hau, who retired as CEO of Vietnam Oil & Gas Group (PetroVietnam) last October, said last year his company could reach an agreement in 2015 with Exxon Mobil for a US$10 billion natural gas and power project, the country’s biggest of its kind. 

Exxon is interested in investing in a gas field, a pipeline to bring the gas to shore and a processing plant, Hau was quoted by Bloomberg as saying. 

“ExxonMobil is in ongoing discussions with PetroVietnam and Vietnamese government agencies and businesses to evaluate the feasibility of developing central Vietnam’s natural gas resources,” the US oil company had said in a statement last August. 

Talking about the reason for the trend of expansion by US firms, Nguyen Mai, chairman of the Vietnam Association of Foreign Enterprises, said that country is boosting investment abroad again amid a strong economic recovery. 

Its economy is forecast to grow at 3.1% this year after 2.4% growth in 2014, according to the New York Times. 

Between 2008 and 2012 the US government, to cope with unemployment caused by the economic recession, stopped supporting businesses that invested abroad and took fiscal stimulus measures to encourage companies to expand in the domestic market, Mai said. 

The trend is also attributable to a shift by US companies from China, where labor costs are rising, to Southeast Asian nations, including Vietnam, he said. 

Besides, US firms expect more opportunities as a result of the US-led Trans-Pacific Partnership (TPP), which is expected to be signed this year. US firms in Vietnam will then have easier access to countries that are signatories to the deal, with tariffs on Vietnamese exports to those markets reducing to near zero. 

The TPP is expected to throw up more opportunities for Vietnamese firms to expand investment in the US. 

They are competitive in fields like telecom and construction. Some Vietnamese firms in the US have won contracts for software development in Silicon Valley, Dang Duc Dung, former deputy chairman of the Hanoi Young Entrepreneurs, said at a recent conference. 

Scott Thomas of Wolverine Worldwide, an American footwear manufacturer, said 75% of the company’s inputs come from China, but that would fall to 33% by 2020. Vietnam, which now supplies 14.5% of the inputs, would then fill the gap, he added. 

Wages in Vietnam are equivalent to just 38% of that in China though workers here offer the same productivity and even higher skills in certain fields. 

Corruption
Being the country with the largest investment abroad in the past several years, the US is likely to become the top investor Vietnam, Mai, chairman of the Vietnam Association of Foreign Enterprises, said. 

According to the 2015 ASEAN Business Outlook survey by the American Chamber of Commerce in Singapore that polled nearly 600 US firms, Vietnam is the second priority market for US firms’ future business expansion after Indonesia. 

Two thirds of the surveyed firms expected profits to increase in 2014, and this rose to 82% for 2015. 

Corruption was their biggest concern, with 69% of the firms saying they were not satisfied with the issue in Vietnam. 

Mai said: “Corruption has affected Vietnam’s FDI inflows. If it is not resolved, Vietnam will become less attractive to foreign investors. 

“Attracting investment from the United States is very important in the context that we want to attract higher quality projects. Obviously, corruption can be found everywhere in the world, but we should make more efforts to reduce it.” 

The growth in US investment in Vietnam is not commensurate with the trade between the two sides, he said. Of the Association of Southeast Asian Nations (ASEAN) member countries, Vietnam is the US’S biggest trade partner. Trade between the two countries was worth some US$35 billion last year. 

Vietnam ranked behind Singapore, Thailand and Indonesia in attracting US investment. By the end of last year the US, with nearly US$11 billion in registered capital, was the seventh biggest out of 101 countries investing in Vietnam, according to the Foreign Investment Agency. 

“Initial interest from potential foreign investors too often does not materialize due to continued problems with corruption, human resource constraints, and the country's overly-complicated, restricted, and unclear licensing and regulatory environment,” Gaurav Gupta, chairman of the American Chamber of Commerce (Amcham) in Vietnam, said. 

AmCham members look to the government to foster a more competitive environment where decisions are made faster and legal procedures are less complicated, rules are fairly enforced, and companies compete on their merits -- including for access to capital, land and opportunities, he said.