Steve Almond, global chairman of Deloitte Touche Tohmatsu Limited and managing partner of International Markets at Deloitte UK, recently came to Vietnam for the Southeast Asia Partners Conference 2013, an annual regional meeting for the leadership of the Southeast Asia region. He talked with the Saigon Times Daily on the prospects and challenges Vietnam faces in attracting foreign direct investment (FDI).

*What is the purpose of your trip to Vietnam? How do you evaluate the role of Vietnam in the growth of Deloitte in Southeast Asia?

The Southeast Asia region is strategically important to Deloitte, and Vietnam is a priority market within the region because of its significant population of approximately 90 million people, the emerging middle-class, and the strong GDP growth.

I’m here in Ho Chi Minh City because we are holding our annual regional meeting for the leadership of the Southeast Asia region here and this is one indicator to show the importance we attach to our business in Vietnam. The other indicator is that Deloitte globally has recognised the Southeast Asia region as one of 11 priority markets. As such, Deloitte has allocated a significant investment of over 50 million USD in recent years into Southeast Asia to grow the business, mainly to attract high-quality skilled talent, of which about 8 million USD has been invested directly into Vietnam.

We are very proud of business in Vietnam and the long-standing high-quality audit and tax practice. There are still a lot of opportunities to expand into other areas and we are investing resources to attract high-quality professionals that can offer advisory services and to train and develop our 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 Vietnam in the first nine months of this year. Surveys have shown that Vietnam is still a very popular destination in Southeast Asia for attracting FDI, which is very positive.

But this is a very competitive field. I spent a lot of my time travelling across Asia, Africa and everywhere I go, the governments and other bodies are always keen 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 the quality of the physical infrastructure, the connectivity of technology and communication and the access to high-quality skills in the labor force.

Hence, for Vietnam to continue to attract more FDI, it should continue to invest more into removing trade barriers, and improving the infrastructure and education for the young work 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 competitiveness index as it does it every year, and Vietnam ranks 70 out of 148 countries, an improvement from last year when it was number 75. But if you look at its progress since 2006, which is the year that the ASEAN economic community blueprint was signed, Vietnam did not really improve when compared to other regional countries.

If you look at some other countries in Southeast Asia, like the very advanced economies like Singapore, which ranks No. 2 and has been for the past three years, and other emerging countries like Cambodia which jumped 23 places in the same period, and the Philippines and Indonesia which have even bigger population than Vietnam and have both also done very well by moving up 19 places in that period, so for Vietnam not to have moved over the period should be a cause for concern.

One of the reasons that Vietnam’s ranking has improved over the last 12 months is that the government policies have addressed some of the macroeconomic instability that Vietnam has been suffering from and inflation has come down significantly from 27 percent to around 6 to 7 percent. But I think more should be done in the areas like removing trade barriers and investing in infrastructure and skills in order to attract more foreign direct investment.

* Vietnam’s government has made a strong commitment to restructuring the economy. Do you think it would make foreign investors feel more confident to invest here?

I think when big businesses look at where to invest, they do not necessarily look at government policies as the consequence of their investment decision but they would certainly like to see government policies which are supportive of investment and business. But the market is very competitive and there are a lot of emerging economies with big population which are particularly attractive for businesses in the consumer industry for instance or for businesses that need access to a highly skilled work force. These businesses are more likely to look at making their decisions based on “where we are today” rather than where the government policies would get them in five years’ time.

I think the point is not just about good thinking on what might be done but really effective execution. If you contrast China and India, two big economies, one of China’s competitive strengths is that they make and execute policies very quickly and very effectively, while India take longer to make decisions on 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 does have some advantages of relatively low wages, relatively high productivity and well-located geographically and political stability.

I think the biggest change over the past five years is not really the change in Vietnam but the change in risk appetite of big companies. Five years ago, the global financial crisis caused many advanced economies and big businesses to become very risk adverse and slow down their investments in foreign countries and focus on rebuilding their own balance sheet and rebuilding capital, and just waiting for confidence to return.

Deloitte does a survey every quarter of CFOs in the UK and elsewhere and that has been showed gloomy sentiment during that time. The most recent survey showed a real change in the sentiment of big companies and the willingness again to take risks and invest in capacity and growth. The big question was where they will be willing to invest, in low-growth economies in Europe or higher growth places in emerging markets like Vietnam. You would have thought that they will be more interested in emerging markets, but the results of the most recent survey shows that companies are willing to invest in the matured economies like the US and Europe as well, so Vietnam and other emerging economies in the region not only have to compete with each other but have to compete with more advanced economies as well.-VNA