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5 Reasons Why Vietnam is Gaining More Attention to the Investor than Indonesia

11 October 2019 | Author : Manufakturindo
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The industrial condition in Indonesia in the past few days has become a major topic in several headlines. It is often heard that Indonesia became inflame by the fact that foreign investor preferred to put their money to Vietnam than to Indonesia.

Enny Sri Hartati, a senior researcher at the Institute for Development of Economics and Finance (Indef), explained a report from World Bank stating several facts regarding relocation of several plants from China to a number of countries in south east Asia region, but none of them relocate to Indonesia.

Not less than 33 companies in China relocate their plants to several countries, 23 of them were relocated to Vietnam, and the rest other are relocated to Kamboja, India, Malaysia, Meksiko, Serbia, dan Thailand.

Knowing the fact that Indonesia is not the main choice for the investor to relocate their plants is like a hard punch for the government. Although the experts and industrial player has already known the causes, Indonesia still have to look at some aspects that made Vietnam more attractive to investors.

Enny mentioned there are 5 things that made Vietnam attractive among the foreign investors, they are:

Ease of regulation

Ease of regulation from the government becomes an important factor regarding permission for the foreign investor to invest in a country. Indonesia must learn from Vietnam regarding the ease of regulation offered by Vietnam government to foreign investor.

According to Enny, giving incentive as a promotion will not attract investor if regulation/permission still encounter obstacles.

Proper Human Resources

A source from World Bank shows that Human Capital Index (HCI) in Vietnam is 0,67 and ranked in 48 from 157 countries. While Indonesia owning HCI in 0,53 and ranked in 87 from 157 countries.

The average minimum wages per month is US$173 or equivalent to IDR 2,42 million per month. Besides that, Vietnam has a smaller number of holiday than the other countries in South East Asian.

Free Trade Agreement

Free Trade Agreement is believed to have contributed to Vietnam's attractiveness. No less than 15 free trade agreements are owned by Vietnam. FTAs make export costs more efficient and easier market penetration.

Infrastructure

The guarantee of electricity supply is considered to increase the strength of infrastructure in Vietnam, thus attracting investor interest. Although Indonesia has the largest power plant in Southeast Asia, in fact Vietnam is more champion in terms of electricity consumption per capita.

Vietnam's government subsidies for industrial electricity consumption even reach US $ 0.07 per hour, while the price of electricity for industry in Indonesia is still at US $ 0.10 per hour.

Macroeconomic Stability

In 2018, Vietnam recorded a very good economic growth, from initially 5.03% in 2012 to 7.1% in 2018. In addition, the Vietnamese currency (Dong) was considered quite stable.

Well that's the 5 things that make Vietnam far more attractive to foreign investors than Indonesia.



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