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(VEN) - The director of the Japan External Trade Organization (JETRO) representative office in Hanoi, Sotaro Nishikawa, when addressing a conference in Hanoi said, "In 2010, Japanese investors poured more than US$2 billion into Vietnam. Even though this can be considered quite a large amount investment capital, it is still low compared to neighboring countries, such as Thailand, which received US$3.3 billion from Japanese investors the same year."
Nishikawa said that JETRO has received inquiries from around 500 potential Japanese consultancy firms about the investment environment in Vietnam. However, there are still a number of barriers that prevent them from making investments in the country. These include problems with the labor force, increasing payroll, weak infrastructure, power shortages in the production sector, lack of supporting industries and unstable exchange rate. According to a Japanese company that specializes in producing packagings in Vietnam, the salary of Vietnamese workers in 2011 is four times higher than in 2007.
As the Vietnamese supporting industry remains undeveloped, 70 percent of parts for production must be imported. As a result, though Vietnamese worker's average salaries (US$123 per month) are only half that of Thai workers, production costs in Thailand are still cheaper because Japanese investors do not have to import as many component parts for the production process.
The exchange rate also poses a problem for Japanese investors. According to new regulations, payments are made in Vietnam dong, rather than foreign currencies. The recent volatile nature of exchange rates, however, has caused concern for foreign investors.
Vietnam's business environment gains momentum
Do Nhat Hoang, Director General of Foreign Investment Agency (FIA), part of the Ministry of Planning and Investment (MoPI), said that worker's salaries in Vietnam have increased in recent years. However, one of the reasons for this, he said, is high inflation, which has showed itself in the rise of the price of most of commodities. On average, about 40 percent of their salaries is spent on food, shelter and other necessities.
As for payment in Vietnam dong, Hoang said that Vietnam is not an exception in this case, and that all the countries apply regulations to pay in domestic currency. He said that Japanese investors should accept this as terms of doing business here.
Hoang also addressed the exchange rate issue, saying that Vietnam has made policy progress to curb volatility. The latest is the restructuring of financial sector, with the main target being commercial banks.
He added that, as for support industries in Vietnam, the Government is aware of investor's problems and is beginning to draft policies and offer incentives aimed at enhancing the development of the sector. In addition, he noted, Vietnam will continue to make policy that encourages the further infrastructure, such as electricity and water, in order to meet foreign investor's demands. Of these, MoIT has presented a project to set up a competitive electricity generation market in 2012 which should lure investors. The recent announcement of the "Total Power" plan to generate 700kW touted that investor's demands could be met and even create surplus for export./.
By Nguyen Hoa
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