Hanoi business environment from investors perspective. Pham Thi Huyen (MBA) VDF Researcher NEU lecturer

Transcription

1 Hanoi business environment from investors perspective Pham Thi Huyen (MBA) VDF Researcher NEU lecturer

2 Contents Hanoi an investment destination Overview FDI flow into Hanoi Hanoi s business environment in the viewpoint of Local authorities Scholars Foreign investors Conclusions

3 Hanoi an investment destination Hanoi capital political and culture exchange center of Vietnam All embassies located in Hanoi Stable political situation, ideal location The city of high quality human resource Great influence on neighboring provinces and cities Prioritized in water and electricity supply Huge market potential Annual economic growth rate in the past 5 years always over 10%

4 FDI flow into Hanoi Registed capital (Bil USD) Project 120number Registed capital Implemented capital Project number Sources: HAPI & MPI, 2006

5 FDI contribution to Hanoi socio-economic development Number of ongoing projects Total registered capital Implemented capital Number of source countries and areas Total sales Export earnings Number of employees in FDI projects 646 USD9.3 billion USD3.3 billion 42 USD12 billion USD3.25 billion 48,000 persons Source: HAPI, 2006

6 Problems? In the development trend of the whole country, whether Hanoi is still attractive when Vietnam becomes a member of WTO member? The neighboring cities and provinces become more active. They provide better public services to investors, whether the FDI flow into Hanoi still stable? Does the local authority still think that Hanoi is always an attractive destination for investors?

7 To become an ideal city--- Target markets Exporters Marketing factors Importers Tourists and conventioneers Infrastructure Attractions Business communities Planning groups New residents Citizens Diagnosis Vision Actions Image and quality of file Local/regional government People Corporate headquarters Investors Manufaturers Source: Marketing Places Philip Kotler, 2002:19

8 Programs to improve the provincial competitiveness Improve the methodology, the procedure and the role of the local authorites Use effectively tools of financial and non-financial encouragements Re-structure public organizations so that the local authorities can manage better Build a new image of the local city, more potential, more attractive with artificial factors rather than focusing on natural factors like geographic location, natural terrain or natural resources

9 FDI attraction: marketing approach Investors come to a location because they hope that they will have benefits from that location Harsh competition in FDI attraction among locations Must understand the targets, orientation and awareness of investors Each investor has their own targets, strategies and policies There is no investment promotion program applied for all investors from different nations and territories.

10 FDI attraction for sustainable development Must understand about the needs and desires of investors Must be able to manage the changes Have an overview about the inter-provincial and inter-regional economic development. Must establish a strong relationship among enterprises, investors and local authorities.

11 Relationship between Government and Business community Government Enterprises Longterm sharing information communication negotiation, dialog common actions Government and businesses are highly interacted Government Short term mechanism communication lack of involment of businesses Enterprises Government and businesses are mechanically interacted

12 Hanoi investment environment in the local authorities perspective Capital, cultural and trade center of the nation Stable political environment, safe business environment High quality human resource Huge market potential Daily improved infrastructure Social service cost, and real estate cost lower than in other locations Many IZs Convenient administrative procedures Source: HAPI websites

13 Hanoi investment environment in the researchers perspective Hanoi is more advantageous than other provinces in term of geographic location, human resource and market potential. Dr. Vu Minh Khuong study compared the competitiveness of Hanoi, Hai Phong and HCMC. He found that Hanoi is more attractive than Hai Phong but much less attractive than HCMC.

14 Hanoi investment environment in the researchers perspective VNCI study about the private economic development policies of provinces in VN revealed that: In 2005, Hanoi ranked 14 th position over 42 about the competitiveness (60.32 point) In 2006, Hà Nội40 th position over 60 (50.34 point) In short: Hanoi advantages have not been ultilized to become a pushing force for economic development The master plan is still rather narrow with limited vision Authories agencies do not exchange information and cooperate well with one another. Informal cost is high, complicated admin. procedures.

15 Influence factors of the investment decision Market potential Partners suggestion FDI attraction policies Traffic system Banking and finance system Law implementation Human resource quality Supporting industries and services Public services Cost management Government suggestion Importance level Hanoi evaluation VDF research, 2005 (ch.2)

16 Influence of traffic system Transportation infrastructure - Availability - Cost reduction - Reliability - Congestion reduction Economic impacts - Improve investment environment - Improve access to consumers market and manufacturing market - Improve productivity economic activities - Improve competitiveness of enterprises Social development -Social service approach - Decrease the regional gap Sustainable Development - Noise - Air pollution Environment

17 Hanoi traffic problems Poor traffic infrastructure Inconsistent development Heavy trucks, inter-province buses still go through the city Limited traffic management, poor public transportation Low awareness about traffic regulations High demand for travelling High increase in vehicles Frequent traffic congestion Environment pollution High cost of transportation Reducing on quality of living environment Low competitiveness Heritate to invest

18 Sustainable development Economics Social Environment

19 Environmental awareness of the society Leaders Support, pay attention But not enough Relationship of Government, Businesses and Community is still loose Environment quality decreased dramatically Enterprises avoid rather than support Community limited economic conditions - no right habits

20 Capital approach Only 59% of enterprises can borrow capital form banks 39.5% of enterprises think that borrowing capital from banks is very difficult or difficult Difficulty level depends on types of enterprises and their scale 41% of enterprises must raise capital from other sources. Reasons The banking and finance system is not ready, approaching is still difficult. Enterprises cannot meet all bank requirements about collateral, complicated procedures, limited financial and managerial capability. Consequences High capital cost High risk VDF research 2005, Ch.4

21 Water, electricity and sewage treatment conditions in IZs 5 Electricity Water Sewage treatment Hanoi Dongnai Danang Hanoi BR-VT Haiduong HCMC Bacninh HungyenBinhduong VDF research 2005, Ch.5

22 Hanoi labor in IZs in relation with other provinces 5 Availability of labor Satisfaction on labor cost Hanoi BR-VT Hungyen Binhduong HCMC Dongnai Hanoi Haiduong Bacninh Danang VDF research 2005, Ch.5

23 Tax policy and authority s attitude 5 Tax and priorities Attitude of officers Hà nội HCMC Hanoi Dongnai Bacninh Haiduong Binhduong BR-VT Hungyen Danang VDF research 2005, Ch.5

24 Business cost in Hanoi Labor cost saving Saving on environmental cost Cost predictability and manageability Other operation cost Land, office, shop rent VDF research 2005, Ch.2

25 Do investors receive what Hanoi promised? Shown via: Level of participation of authority agencies of Hanoi Attitude and the professionality in public service supply In fact, investors do not receive what Hanoi promised them: Poor service Improper working attitude Untransparent information Lack of cooperation among agencies Corruption at almost levels (more than 200 permission documents, the validity of these documents is short)

26 Hanoi propaganda programs to investors Informal programs about Hanoi business environment are not well implemented Only 70% of enterprises took reference from HAPI, but their evaluation on this information resource is low, only 3.3/5. 56% of enterprises took reference from VCCI, but the quality is 1.5/5 Vietnam embassies in foreign countries are referred by only 12% surveyed enterprises. Enterprises trust the information from: Their partners and their own experience Their embassies in Vietnam MPI

27 Relationship between HN authority and enterprises The authority awareness: partner relationship Actual implementation: Power is centered at top level. Top down policy approach lower level has less power Administrative internvention -> Increase the gap

28 Relationship between HN authority and enterprises Information channels: VBF; SME support center, VCCI and other organizations: VCA Enterprise community participation into policy formulation is still limited. Opinions of investors are not absorbed comprehensively at the beginning of the formulation process.

29 Investors satisfaction level about Hanoi business environment There is a big difference between what Hanoi authority think and what the investors think difference in awareness and hope of investors 56% of enterprises feel satisfied when doing business in Hanoi (whereas there are 67.6% enterprises feel so when doing business in Vietnam) 44% of enterprises feel un-satisfied with Hanoi management method (the rate for the whole nation is 32.4%) 31,3% of enterprises are thinking of other locations to invest rather than Hanoi, including some clean production enterprises, tourism enterprises and enterprises in training and education field.

30 Regional factor in local development strategy

31 Hanoi in relationship with other locations Hanoi development -> Other locations are also developed, but they are also polluted. Hanoi development depends not only on its own strengths but also on other locations Hanoi pollution is partly due to other locations Development strategy of each province must be consistant with other locations Hanoi development strategy must be consistant with other provinces and the whole country Vietnam development strategy must be one part of the regional and the global development strategy

32 Conclusion Strengths (S) 1. Location of big events of the nation 2. Available labor force, high quality human resource 3. Potential market 4. Services are various Opportunities (O) 1. Vietnam becomes WTO member 2. FDI flows are changed from China to Vietnam 3. Investors attraction into infrastructure field, transportation and services Weaknesses (W) 1. Inconsistent infrastructure 2. Land shortage for IZ development, land renting price is high 3. Supporting industries are still weak 4. Attitude of civil servants Threats (T) 1. Compete with other provinces 2. Land for industrial development if shrinking 3. More serious environment pollution 4. Lack of highly skillful human resource