[Vnbiz] Investment in Vietnam Still Risky

[Phan, Tai]

Investment in Vietnam Still Risky
 
 

By Park Hyong-ki
Staff Reporter
LG Economic Research Institute (LGERI) issued a warning against hasty corporate investment to build factories in and sell goods to Vietnam as the country still lacks the basic infrastructure essential for business activities.

It said inroads into the country could be highly risky at least until 2010-2015 when the country's industrialization is expected to reach a point attractive enough for foreign investors.

``Vietnam is certainly a land of opportunity with rich natural resources and a huge growth potential but the short-term outlook is not bright,'' the institute said in a report.

The report came as a growing number of companies are moving to build factories in the country. Korean investors are also showing a greater interest in stocks and properties there.

Among risks there are a low purchasing power and shortages of workers in the fields of science and technology.

The report added that since Vietnam barely has companies that produce machinery parts and lacks a highway transportation system, it would make it difficult for domestic firms to establish regional bases there.

Also, its real estate and stock prices are volatile, as global investors are expanding investment in the relatively small and underdeveloped capital market. Analysts said that the market is still too small to absorb growing investment. The Vietnamese economy has grown about 8 percent in recent years.

``Apartment prices in Hanoi and Ho Chi Minh have jumped two to five times over the past three years. There are signs of overheating,'' it said.

But the long-term outlook is positive, it said.

The institute expects economic reforms led by the government, including the construction of steel, oil and petrochemical plants, to improve the country's infrastructure by 2009.

The Vietnamese economy will emerge a lot stronger by 2010 or 2015, and there is a high chance that its economy will surpass that of Thailand and Indonesia by 2020, it said.

Many global companies are considering Vietnam as their next emerging growth platform, after the country became the 150th member of the World Trade Organization last year.

Southeast Asia's second most populous country raked in foreign direct investment of more than $9 billion last year. 



phk at koreatimes.co.kr 

02-04-2007 18:11