With increasing foreign direct investment (FDI) flows into its manufacturing sector, Vietnam stands a great chance of leaping ahead and replace China as the new production center.
Speaking at a conference recently organized by the State Bank of Vietnam in collaboration with the World Bank, Victoria Kwakwa, the World Bank’s Country Director for Vietnam, said FDI flows into Vietnam’s manufacturing sector has rapidly increased over the past 10 years and will possibly rise more.
Official figures showed that foreign investors registered US$11.36 billion for manufacturing projects, accounting for 66.3 percent of the total pledges in the first nine months.Last year the sector attracted 72 percent of the total registered capital, compared to 50 percent in 2011.
Although the FDI proportion of Vietnam’s manufacturing sector was small compared to those of countries such as China, Indonesia and Thailand, the Vietnamese sector has more potential, Kwakwa said.
Vietnam has a good location and boasts a source of labor which is plentiful and cheap, she said, adding that the country is also benefiting from a range of free trade agreements.
Tran Bac Ha, chairman of the Bank for Investment and Development of Vietnam (BIDV), saw Vietnam’s opportunity coming from international producers’ recent shifts to Southeast Asian countries from China, which is losing its appeal with slowing economic growth and surging labor costs.
South Korean investment into China dropped by 32.1 percent in the first half of the year, Ha said, quoting Korean finance ministry’s figures. Last year, only 700 South Korean businesses were established in China, compared to 2,300 in 2006.