Monday, January 22, 2007

Vietnam Emerging as Haven for Korean Firms

A majority of Korean companies are happy to operate in Vietnam, thanks to a combination of tax benefits and a cheap but highly productive work force.

Over 90 percent of 217 Korean-invested companies in Vietnam said that they are highly satisfied with their local operations.

The office of KOTRA, the nation’s trade and investment promotion agency, conducted the survey Nov.-Dec. last year to assess Korean business performance, and disclosed the results on Monday.

Vietnam is considered the next emerging growth platform for many global firms, as the country became the 150th member of the World Trade Organization last year. Southeast Asia’s second most populous country enjoys a rapid economic growth rate of about 8 percent annually with foreign direct investment recording more than $9 billion in 2006.

Companies like Korean steel maker POSCO and retail operator Lotte Shopping are set to make inroads in Vietnam to construct a plant and a large discount store this year, respectively.

POSCO plans to build a cold-rolled steel plant beginning October 2007 with an aim of completing construction by the end of 2009.

Lotte Shopping, in the meantime, will break ground for its first overseas Lotte Mart in Vietnam this year with the goal of opening it next year.

According to KOTRA, two-thirds of the Korean companies in Vietnam are in the manufacturing sector, especially in the textile and chemical businesses.

Firms picked Vietnam’s booming economy with rising domestic consumption as the No.1 reason for their investment in the country, while others chose Vietnam because it provides an easy export access route to third countries like the United States, Europe and the ASEAN countries. Finally, Korean companies picked cheap labor as the No.3 reason why they were attracted to Vietnam.

Korean companies invested an average $12.4 million to make inroads to Vietnam where, they say, it takes less than a year or six months to build a factory and make it fully operational, KOTRA said.

Also, sales of Korean-invested firms hit $1.1 billion in 2005, up about 11 percent from the year before.

``This is largely attributed to their brisk exports to third countries and Vietnam’s bolstering economy,’’ said a KOTRA official.

Although Vietnam poses as a land of opportunity where it takes an average three years for Korean firms to make profits, they still need to assess risks.

``Most of the firms are optimistic about their businesses in Vietnam, but lack of information about Vietnam, communication problems and a sound governmental policy on foreign companies make it difficult to operate there,’’ said the KOTRA official.

Sourse: Korea Times

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