Steve Almond, global chairman of Deloitte Touche Tohmatsu Limited andmanaging partner of International Markets at Deloitte UK, recently cameto Vietnam for the Southeast Asia Partners Conference 2013, an annualregional meeting for the leadership of the Southeast Asia region. Hetalked with the Saigon Times Daily on the prospects and challengesVietnam faces in attracting foreign direct investment (FDI).
*What is the purpose of your trip to Vietnam? How do you evaluatethe role of Vietnam in the growth of Deloitte in Southeast Asia?
The Southeast Asia region is strategically important to Deloitte, andVietnam is a priority market within the region because of itssignificant population of approximately 90 million people, the emergingmiddle-class, and the strong GDP growth.
I’m here inHo Chi Minh City because we are holding our annual regional meeting forthe leadership of the Southeast Asia region here and this is oneindicator to show the importance we attach to our business in Vietnam.The other indicator is that Deloitte globally has recognised theSoutheast Asia region as one of 11 priority markets. As such, Deloittehas allocated a significant investment of over 50 million USD in recentyears into Southeast Asia to grow the business, mainly to attracthigh-quality skilled talent, of which about 8 million USD has beeninvested directly into Vietnam.
We are very proud ofbusiness in Vietnam and the long-standing high-quality audit and taxpractice. There are still a lot of opportunities to expand into otherareas and we are investing resources to attract high-qualityprofessionals that can offer advisory services and to train and developour over 700 people that are working for Deloitte Vietnam.
* Given Vietnam’s recent instability of the macro economy, is Vietnam still attractive to foreign investors?
Vietnam has already exceeded its target for foreign direct investment(FDI) in 2013 and 15 billion USD has already been invested into Vietnamin the first nine months of this year. Surveys have shown that Vietnamis still a very popular destination in Southeast Asia for attractingFDI, which is very positive.
But this is a verycompetitive field. I spent a lot of my time travelling across Asia,Africa and everywhere I go, the governments and other bodies are alwayskeen to attract more FDI. There are challenges and I think undoubtedly,government policies such as providing tax incentives can certainly help.However, I think much more important to business are things like thequality of the physical infrastructure, the connectivity of technologyand communication and the access to high-quality skills in the laborforce.
Hence, for Vietnam to continue to attractmore FDI, it should continue to invest more into removing tradebarriers, and improving the infrastructure and education for the youngwork force to ensure they have the right skills.
* In comparison to other regional countries, what are the chances for Vietnam to attract more FDI?
The World Economic Forum has recently published its competitivenessindex as it does it every year, and Vietnam ranks 70 out of 148countries, an improvement from last year when it was number 75. But ifyou look at its progress since 2006, which is the year that the ASEANeconomic community blueprint was signed, Vietnam did not really improvewhen compared to other regional countries.
If youlook at some other countries in Southeast Asia, like the very advancedeconomies like Singapore, which ranks No. 2 and has been for the pastthree years, and other emerging countries like Cambodia which jumped 23places in the same period, and the Philippines and Indonesia which haveeven bigger population than Vietnam and have both also done very well bymoving up 19 places in that period, so for Vietnam not to have movedover the period should be a cause for concern.
Oneof the reasons that Vietnam’s ranking has improved over the last 12months is that the government policies have addressed some of themacroeconomic instability that Vietnam has been suffering from andinflation has come down significantly from 27 percent to around 6 to 7percent. But I think more should be done in the areas like removingtrade barriers and investing in infrastructure and skills in order toattract more foreign direct investment.
* Vietnam’sgovernment has made a strong commitment to restructuring the economy.Do you think it would make foreign investors feel more confident toinvest here?
I think when big businesses look atwhere to invest, they do not necessarily look at government policies asthe consequence of their investment decision but they would certainlylike to see government policies which are supportive of investment andbusiness. But the market is very competitive and there are a lot ofemerging economies with big population which are particularly attractivefor businesses in the consumer industry for instance or for businessesthat need access to a highly skilled work force. These businesses aremore likely to look at making their decisions based on “where we aretoday” rather than where the government policies would get them in fiveyears’ time.
I think the point is not just aboutgood thinking on what might be done but really effective execution. Ifyou contrast China and India, two big economies, one of China’scompetitive strengths is that they make and execute policies veryquickly and very effectively, while India take longer to make decisionson policies and execute them.
* What is the change in attitude and interest of foreign investors in Vietnam now compared to five years ago?
I would say Vietnam is on the radar for big businesses because it doeshave some advantages of relatively low wages, relatively highproductivity and well-located geographically and political stability.
I think the biggest change over the past five years isnot really the change in Vietnam but the change in risk appetite of bigcompanies. Five years ago, the global financial crisis caused manyadvanced economies and big businesses to become very risk adverse andslow down their investments in foreign countries and focus on rebuildingtheir own balance sheet and rebuilding capital, and just waiting forconfidence to return.
Deloitte does a survey everyquarter of CFOs in the UK and elsewhere and that has been showed gloomysentiment during that time. The most recent survey showed a real changein the sentiment of big companies and the willingness again to takerisks and invest in capacity and growth. The big question was where theywill be willing to invest, in low-growth economies in Europe or highergrowth places in emerging markets like Vietnam. You would have thoughtthat they will be more interested in emerging markets, but the resultsof the most recent survey shows that companies are willing to invest inthe matured economies like the US and Europe as well, so Vietnam andother emerging economies in the region not only have to compete witheach other but have to compete with more advanced economies as well.-VNA