VIETNAM STILL HOT FOR US INVESTORS

Though Vietnam has struggled to recapture the supercharged growth rates it once enjoyed and countries like Indonesia and the Philippines are increasingly seen as more attractive for investors. It is still a prime market that American companies are seeking to expand in.

A recent survey conducted by the American Chamber of Commerce in Singapore (AmCham Singapore) and the U.S. Chamber of Commerce, which was reported earlier by The Wall Street Journal.

 The survey, which polled more than 350 leaders of U.S. companies operating in the region, not only found that more American employees are asking to relocate to Southeast Asia, a surprise to analysts who have long assumed China and India were the hot spots but also found that 57% of the companies polled intended to expand their operations in Vietnam, compared to a mere 6% in Indonesia and 11% in Thailand.

For American companies already operating in Vietnam, 82% expect an increase of profits next near and more than half are planning an expansion of their workforce. Such results are a sign that sentiment around the country among some companies remains positive.

Analysts have widely argued that Vietnam needs to pursue more aggressive economic overhauls, including steps to privatize state companies, if it wants to start attracting new rounds of big foreign investment.

Vietnam's  sizable consumer market of 91 million and relatively low-cost labor pool are still attractive for many companies, and some may be betting that the country will grow out of its economic problems eventually. Some economists have argued that steps to tighten credit and rein in inflation have positioned Vietnam to rebound once the global economy recovers from its recent slump, though that remains to be seen in the coming years.

Political relations between Vietnam and the U.S. have also continued to improve, especially as Hanoi locks horns with the region’s other economic power, China, over territorial rights in the South China Sea, all of which could make American companies feel even more welcome in Vietnam than before.

Finally, the survey yielded yet another sign that Southeast Asia is climbing higher on the priority list for investors and companies: 21% of them are planning to divest from China and reinvest in countries in the Southeast Asian, compared to just 15% last year.

Wall Street Journal

August 31, 2012