By Dr Arno Maierbrugger
Of the Southeast Asian nations on the radar for Middle East investment, Vietnam so far has played an underestimated role. The country experienced a respectable GDP growth of 5.08% in 2012 and is forecast to grow further at 5.2% in 2013, picking up to 5.6% in 2014 if progress is made in strengthening the banking sector and recovery in major industrial economies gathers momentum in 2014, the Asian Development Bank said.
Certainly, there are some risks as opposed to other Asean countries, which are mainly the scale of the non-performing loans, the frozen property market and the ongoing restructuring of state-owned enterprises. Despite these concerns, Vietnam has remained an attractive investment destination in light of its growing working-age population and low labour costs.
Qatar has already realised this fact and has entered into talks on the development of multi-faceted co-operation during a visit of Vietnamese Foreign Minister Pham Binh Minh with Qatari Prime Minister HE Hamad bin Jassim bin Jabor al-Thani at the end of March 2013, together with Vietnamese business representatives. On the occasion, both sides agreed to organise a Vietnam-Qatar Intergovernmental Committee, with the aim to complete a legal framework and work out co-operation directions in various business and diplomatic sectors.
What has Vietnam to offer? First of all, the country is in dire need of infrastructure upgrades. Just recently, the government invited domestic and private companies to invest in airport infrastructure because Vietnam has been facing a phenomenal surge in passenger volume from 6mn passengers in 2000 to 52mn in 2012. Currently, capital allocated by the state budget to the aviation infrastructure just accounts for 1.8% of the total capital allocated to the transport development every year. The annual budget can meet just 60% of the real demand, and the rest should be met with investment from the private sector.
Other opportunities can be found in the manufacturing sector. Vietnam is the 8th cheapest country in the 10-member Asean bloc in terms of labour costs, only beaten by Cambodia and Laos. The minimum wage reaches from around $25 a month for unskilled workers in the provinces to $112 a month for skilled workers in the main cities of Hanoi and Ho Chi Minh City. Manufacturing is focused on electronics and telecommunication equipment, as well as food and agro-business, including machinery, processing technology and animal feed supply including all related supply chains, including packaging, components and spare parts. Apart from that, Vietnam also has a growing information technology and software development business. Medical devices, pharmaceuticals, healthcare and related industries are other expanding areas.
Vietnam is also a country that has come in the focus of foreign investment funds, which makes the private equity market another interesting sector to look at.
Our columnist Dr Arno Maierbrugger is Editor-in-Chief of www.investvine.com, a news portal owned by Inside Investor focusing on Southeast Asian economic topics as well as trade and investment relations between Asean and the GCC. The views expressed are his own.Last updated:
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