Tiny foreign firms a cause of worry for HCMC

By Dat Nguyen   August 30, 2018 | 04:46 pm PT
Tiny foreign firms a cause of worry for HCMC
Workers at a foreign-owned company outside Hanoi. Photo by Reuters
The increasing investment of small sums in HCMC by foreign businesses is worrying experts.

In the first eight months this year 658 new FDI projects were licensed, but they only had a combined capital of $581.8 million, according to the General Statistics Office.

They include businesses investing just a few thousand dollars.

French consultancy J&P is capitalized at $3,000, computer consultancy Streamy from Ireland at $2,600 and another French firm, Evocom, at $2,200.

These firms are “too small” to benefit Vietnam’s economy but there are no regulations prohibiting them, Su Ngoc Anh, director of the HCMC Department of Planning and Investment, told Thanh Nien newspaper.

The city chairman, Nguyen Thanh Phong, had previously expressed concern about the entry of small foreign firms.

The average capital of a foreign project in HCMC is less than $1 million, too small to have an impact, he had told a recent conference.

“Why has the city not been able to attract bigger investment? What are the obstacles?”

Lack of land

One of the obstacles is the shortage of land, Dr Dinh The Hien of the Institute of Information and Economic Research (IIB) said.

The metropolis used to attract many foreign property businesses because of its abundance of land, he said.

But investing in real estate has been difficult in recent years due to challenges in finding land and completing legal procedures, he said.

Many foreign firms want to invest in the city but then move to the neighboring provinces of Binh Duong, Dong Nai and Long An which have more available land, he said.

So attracting FDI in infrastructure and technology should be the goal of the city now, he said.

Do Nhat Hoang, head of the Foreign Investment Agency, said the high land rentals are scaring investors away from the city.

Renting land for a factory in HCMC costs about $160 per square meter per year, but five kilometers away from the city, it drops to just $50-60, he said.

But he said the city should create favorable conditions even for businesses investing $2,000-3,000 so that can develop and invest further.

Singapore allows businesses to operate with $1 capital, he pointed out.

What is of greater significance is that Vietnamese firms would improve their services and capabilities when working with these foreign businesses, he said.

Over 54 percent of 1,765 foreign businesses in Vietnam reported profits last year, the lowest since 2012, according to a survey by the Vietnam Chamber of Commerce and Industry.

Almost 38 percent reported losses, 10.4 percentage points higher than in 2012.

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