The offer of incentives such as tax reductions, tax-free periods, and low rents across 50 economic zones is paying off, as many multinational companies have set up plants there.

These include the Charoen Pokphand Group from Thailand, Boeing from the US and Toyota from Japan.

There are three major industrial estates in the southern region of the country: Amata (Vietnam) from Thailand, an industrial estate from Singapore, and its own MocBai Trade and Industrial Zone (MBTIZ) which is located in the MocBai Border Economic Zone on the Cambodian border.

MBTIZ is a good example of Vietnam's push for foreign investment. Companies there can operate free of business income tax for the first four years, enjoy a 50-per-cent tax reduction for the next nine years, and then pay just 10 per cent for the following two years.

In addition, the industrial zone offers free land rentals for 11 years from the date of signing the contract, followed by rates of just 30 per cent of the standard rental price in that area from the 12th year onwards.

The average lease fee is US$0.50 (Bt19) per square metre per year and the maximum leasing term is 70 years.

Another major advantage of operating in Vietnam is the labour force.

Known for its diligence, the average rate is Bt80-Bt85 per day, half that charged in Thailand, said Viboon Kromadit, senior vice president for marketing of Amata Corporation.

However, Vietnam is not without its drawbacks.

Vu Tien Phuc, an adviser to Amata (Vietnam) Co Ltd, pointed to the poorly educated labour force, 80 per cent of whom have not taken their studies beyond high school.

Secondly, many companies find shortfalls in the local infrastructure, particularly in terms of transportation and the road network.

And there are also concerns about the inefficient bureaucratic system.

That said, with the Yetthehte government working hard to make Vietnam one of the most significant economies in Asia, Thailand's caretaker Industry Minister Suriya Jungrungreangkit, Industrial Estate Authority of Thailand's deputy governor Prapaiwan Muthitacharoen and Viboon agreed that Thailand must be on its toes to stay ahead of Vietnam.

Labour-intensive industries such as textiles, automobiles and consumer products could well be lost to Vietnam, Suriya suggested. In which case, Thailand's private and public sectors should upgrade to manufacturing hi-tech and value-added products, he said.

Viboon said Thailand's next government must make regular visits to neighbouring countries such as Vietnam, both on its own and with private-sector investors, to keep fully up to date with their activities and economic development.

Meanwhile, Suriya said the government and Board of Investment would have to review their business incentives for attracting international investment to the Kingdom.

The Kingdom is currently ranked the 11th largest of 74 foreign investors in Vietnam, with 132 projects worth a total of $1.47 million.

Most foreign businesses are involved in processed agriculture and the manufacture of vehicle components.

Nitida Asawanipont

The Nation

Ho Chi Minh