Once the largest source of foreign investment in Vietnam, Taiwan has lost its No. 1 investor position to Japan and South Korea, amid concerns over rising wages, Vietnam’s representative in Taiwan said.
Bui Trong Van, head of the Vietnamese Economic and Cultural Office in Taipei, said he hopes Taiwan will regain the top title this year through bilateral partnerships in the high-tech and agricultural sectors.
“We hope Taiwanese businesspeople can reassume the leading position they held for a long time, despite the rapid growth of Japanese and South Korean investment in Vietnam,” he said in a recent interview.
Taiwan’s annual investment in Vietnam was surpassed by Japan and South Korea last year due to Taiwanese investors’ concerns over Vietnam’s rising wages, inflation, volatile exchange rates and dwindling incentives, Bui said.
According to the Vietnamese Ministry of Planning and Investment, 43 countries and regions invested in the country in the first six months of last year.
Japanese companies led investments by pouring US$4.15 billion into Vietnam during the period, accounting for 65.1 percent of total foreign investment, the ministry’s statistics showed.
Companies registered in the British Virgin Islands ranked second with US$484 million in newly registered capital, representing 7.6 percent of total investment.
South Korean enterprises were third with new investment of US$480.8 million, accounting for 7.5 percent of the total.
However, based on data compiled by the Ministry of Economic Affairs in Taipei, Taiwanese companies invested only US$80 million in Vietnam in the first half of last year, down 60.6 percent from the same period in 2011.
Bui said that wages have become the biggest obstacle for Taiwanese businesspeople when considering further investment in Vietnam, where soaring inflation has lowered workers’ real income and sparked demands for higher nominal wages.
“Like in other countries, this is a trend. Wages cannot fall too low,” he said.
Since Vietnam joined the WTO in 2007, its government has reduced investment incentives for certain countries and become more selective in accepting foreign investment proposals to encourage “green” industries, Bui said.
However, he said that Vietnam is still a worthwhile investment destination for Taiwanese high-tech companies because of its geographical proximity to the Chinese market and rich human resources.
There are also opportunities for Taiwan’s advanced agricultural technology sector to help increase Vietnam’s yields of crops such as rice, coffee and rubber, Bui said.
“Vietnam has several advantages as an investment destination because its culture and customs are similar to Taiwan’s,” he said. “Many Taiwanese businesspeople feel comfortable and safe there.”
Although Vietnam’s economy grew about 5 percent last year — a lower rate than its long-term average of 7 percent — the figure is still acceptable when compared with most of its neighbors in Southeast Asia, Bui said.
He suggested that Taiwanese companies consider investing more in Vietnam in the near future because his government is prepared to lower inflation and boost the country’s economy this year.
Asked about the possibility of a free-trade agreement between Taiwan and Vietnam, Bui said the two sides will begin by assigning academics and professionals to study each other’s economic situations.