Small FIEs in HCM City expand investment scale

VietNamNet Bridge – While big investors now tend to reduce investment capital at big projects, a lot of foreign invested enterprises (FIEs) which have small capital, now tend to increase their investment capital.

According to the HCM City Planning and Investment Department, by the end of September 2010, 65 FIE projects in the city had increased their investment capital, with the total registered capital of $168.9 million. Most are operating in the fields of production, industry, service and retail. On average, each has an investment capital increase of $15 million.

The list of investors planning to increase investment capital includes well-known companies, such as Lotteria Vietnam, which plans to increase capital by seven million dollars for expansion. Adidas Vietnam has decided to raise its investment capital by one million dollars to $3.9 million. Meanwhile, Giant South Asia has decided to raise capital by $15 million to $20 million, which will be used to develop distribution networks and build new depots.

Lu Thanh Phong, Deputy Director of the HCM City Department of Planning and Investment, noted that, over the last two years, the number of FIEs operating in the fields of processing, manufacturing and industrial production and raising investment capital has increased. In 2009, 115 FIE projects in HCM City increased their capital by $317 million, an increase of 1.79 percent over 2008.

Nguyen Tan Phuoc, Deputy Chair of the HCM City Board of Management for Industrial Zones and Export Processing Zones (HEPZA), thinks that at first, most production enterprises only inject small sums of capital in Vietnam to explore the situation. After that, they decide to expand when they believe in development potential and market stability.

“We have noted that projects with moderate investment capital usually have quick disbursement rates and high implementation levels,” Phuoc commented.

Yuki Vietnam, a subsidiary of Japan’s Yuki Group, which now accounts for 30 percent of the market share in producing and supplying components and industrial sewing machines in the world, has decided to pour five million dollars more to build workshops, lease land and purchase more equipment and machines. This is the third time its investment capital in Vietnam (its capital now is $20 million) has climbed since it first set up production in Tan Thuan Export Processing Zone in District 7 in HCM City in 1994.

Tsunoda Shinji, General Director of Yuki Vietnam, explained that the increase will allow the company to make products for local consumption instead of focusing solely on exports.

At present, Yuki’s revenue in Vietnam is $16 million per annum, a figure expected to rise in the future to $24-26 million. The general director has revealed that products manufactured in Vietnam will be exported to India, Bangladesh, Indonesia and will also be sold domestically. Meanwhile, products made by its three factories in China will only be sold there.

The company is seeking permission from government agencies to allow it to make products and sell products on Vietnam’s market. It is estimated that 50 percent of Vietnamese garment companies use Yuki sewing machines.

Not only industrial projects, but those in service and education are also planning to increase capital as investors have realized Vietnam’s market potential. Australian RMIT University has increased its legal capital by $6.5 million and has invested $15.1 million to build dormitories. Merilyn Liddell, RMIT Director, noted that this is also the part of a plan to expand the space of RMIT Nam Saigon by 2013, which aims to provide internationally-standardized education in Vietnam.

Analysts have pointed out that the biggest problem for FIEs that plan to expand investment is that Vietnam lacks skilled workers. Therefore, 3-5 years before making decisions to increase investment capital, firms must train the labour force themselves.

Source: Dau tu