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Published on December 2, 2007

Vietnam, which joined the World Trade Organisation (WTO) in January of this year, is currently the darling of foreign investors from Japan, Taiwan, South Korea, Singapore, the United States and the European Union, among others, attracting a combined US$16 billion (Bt541 billion) in foreign direct investment (FDI) in the first 11 months of the year.

Besides FDI, hundreds of thousands of affluent overseas Vietnamese, mainly those in the US and France, send remittances amounting to $5 billion annually. Vietnam, with a population of 84 million compared to Thailand's 64 million, has also witnessed significant credit growth along with increases in property values, resulting in strong domestic demand and purchasing power.

In addition, the government has committed to reforms, which should lead to a more level playing field for the private sector, while the export machinery has been recording high growth rates.

Vietnam's entry to the WTO has also opened the door for its financial markets to enter into a new stage of development, while the opening of the stock market has led to changes in the capital market with a greater inflow of funds from banks and companies as well as foreign and domestic investors in various business sectors.

Tan Xuan Vu, the economic counsellor for the Vietnamese Embassy in Bangkok, explained that his country had become an attractive destination because of its political stability; open environment for investment with improved policies and regulations on foreign investment; high gross domestic product (GDP) growth, averaging 7-8 per cent per annum over the past decade; an educated and skilled labour force; and cheap raw materials. In the first six months of the year, exports also increased 19 per cent year on year to a total of $22.4 billion, while more than 2.1 million foreign tourists visited the country, up 14.7 per cent from the same period last year.

The Asian Development Bank estimates that Vietnam would need $140 billion-$150 billion in capital investment based on its current growth rate of 8 per cent per annum.

FDI in Vietnam rose 38 per cent during the first nine months of the year from the same period last year, with major investments in heavy industry and real-estate development, such as the construction of hotels, as well as office and apartment buildings.

To facilitate foreign investment in the real-estate sector, the law was revised to allow foreigners to lease land for up to 70 years, up from the previous 50 years. Overseas Vietnamese are also permitted to buy houses locally, with statistics showing that 100,000 of the 3 million Vietnamese living overseas are interested in making such investments.

In addition, there is a significant shortage of office and retail space. This has resulted in office rents in Hanoi reaching $40-46 per square metre per month, making it one of the most expensive places in Asia.

Based on a recent GDP growth comparison with China being the reference, Thailand with an average annual growth rate of 5 per cent and a per-capita income of $2,520 is about 14.5 years ahead of China, which has an average annual growth rate of 8.4 per cent and a per-capita income of $1,225. When compared with China, Vietnam, however, is 12.7 years behind in terms of per-capita income.

In other words, Thailand may appear to be as many as 27 years ahead of Vietnam by this comparison, but such a measure is probably misleading, given Vietnam's political stability, commitment to reforms, extensive privatisation programme, rising GDP and FDI and its promulgation of a new land law, among other factors.

Hopefully, Thais will not stand idle and lag behind their neighbours in the coming decade.

Nophakhun Limsamarnphun

 nop1122@yahoo.com