In light of increasing inflation in Vietnam, Taiwanese investors should approach business opportunities there with caution, the Ministry of Economic Affairs (MOEA) said yesterday.
Vietnam’s inflation rate surged 25.2 percent year-on-year last month, while the accumulated inflation rate for the first five months of the year climbed to nearly 16 percent, compared with an inflation rate of 12.63 percent last year, the ministry said in a press release.
“The Vietnamese economy has been growing rapidly in recent years, which has attracted an inflow of hot money to the local real estate and stock markets,” Berton Chiu (邱柏青), director-general of the ministry’s investment services department, said by telephone yesterday.
Statistics provided by the Vietnamese government indicate that investment in Vietnam by Taiwanese businesspeople reached US$10.9 billion in April, making Taiwan Vietnam’s third-largest source of foreign capital after South Korea and Singapore.
There are 1,800 Taiwanese companies investing in Vietnam the statistics indicated, but Chiu said the actual number could be as high as 3,000 because a lot of Taiwanese companies do not invest under their own names.
Large Taiwanese enterprises with investments in Vietnam include Sanyang Industry Co (三陽工業), Vedan Enterprise Corp (味丹企業), Formosa Plastics Group (台塑集團), Hon Hai Precision Industry Co (鴻海精密) and textile and shoe-making companies, Chiu said.
In order to combat inflation, the Vietnamese government has adopted a contractionary monetary policy, with the central bank raising its benchmark interest rate to 14 percent. In addition, the deposit reserve rate and discount rate have been raised to 12 percent and 13 percent respectively.
As commodity prices rise globally, Vietnam has seen a surge in imports as a result of the overexpansion of state-owned enterprises and government investment in expanding public construction.
Vietnam’s imports in the first five months of the year totaled US$37.8 billion, while exports amounted to only US$23.4 billion, resulting in a trade deficit of US$14.4 billion.
That has in turn led to the depreciation of the dong, the ministry said.
The ministry said it had asked its office in Vietnam to monitor the situation and to stay in contact with Taiwanese businessmen in Vietnam.
“The government hopes that this is only a temporary phenomenon and the Vietnamese economy will be able to recover soon,” Chiu said.
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