The Charoen Pokphand Group plans to set up its second manufacturing base for livestock and aquaculture in Vietnam within 10 years, thanks to the country's generous trade and investment sweeteners.

"The company will develop a manufacturing base integrated from farm to finished product in Vietnam, because its government provides many privileges to foreign investors," Sooksunt Jiumjaiswanglerg, president of Charoen Pokphand Vietnam, said yesterday.

Vietnam's recent accessionto the World Trade Organisation (WTO) will also make it one of the world's most attractive investment magnets for foreign investors, he said.

At yesterday's seminar entitled "Vietnam's Accession to the WTO: Benefits and Challenges for Thai Enterprises", government officials and private enterprises warned local enterprises to accelerate upgrading their business; otherwise, Vietnam could win out over Thailand. It could become the world's major exporter of agricultural and industrial goods, as well as a major provider of services.

The CP Group, Thailand's biggest agro-conglomerate, has invested in Vietnam for more than 15 years and enjoyed annual revenue growth of 10-15 per cent. However, sales have jumped by 30 per cent in the past few years and the company expects to keep that pace up for another year due to rising market demand.

Vietnam offers investor-friendly trade and investment regulations together with political stability. It could pass Thailand to become the leading export country and draw more foreign direct investment (FDI) in the next five years, Sooksunt said.

Vietnam's government offers zero income tax for foreign investors in the first three years. It allows 100-per-cent foreign ownership after companies establish a 30-per-cent joint venture with local enterprises.

Winichai Chaemchaeng, deputy director-general of the Trade Negotiations Department, said having been forced to eliminate many restrictions banned under the WTO had made the country more attractive than Thailand.

Vietnam and Thailand have similar export goods, such as rice, textiles and garments, seafood, coffee and rubber. Vietnam is the world's second-largest rice exporter after Thailand and the world's second-largest coffee exporter after Brazil. It is also the world's leading pepper supplier.

Thai enterprises should focus on manufacturing value-added products rather than compete with Vietnam as the country has lower manufacturing costs, he said.

Vietnam has the upper hand over Thailand mainly in natural resources and labour wages. Vietnam's labour costs only US$55 (Bt1,963) per month, while Thailand's minimum monthly wage is $103.

Ronnarong Phoolpipat, director of the Trade Negotiations Department's Services and Investment Negotiations Office, said Vietnam could have a stronger service business than Thailand in the near future. The transferring of foreign investor's technology in the service business will encourage Vietnam to become the world's top service export country.

Under WTO commitments, Vietnam will liberalise most service businesses for foreign investors by 2009. They include telecommunication, construction, IT and computer services, advertising, education, accounting, law, finance, transportation and tourism.

For instance, IBM recently set up its manufacturing base for software and services in the country. The country could become the world's second-largest IT service provider after India, Ronnarong said.

According to the department's statistics, FDI in Vietnam increases by 8-9 per cent a year, while Thailand's FDI grows only 2-4 per cent annually.

Sunanta Kangvalkulkij, director of the Agriculture Negotiations Bureau, said Vietnam had great potential to become the world's leading agriculture supplier. The Kingdom may lose some export markets to Vietnam.

Although Vietnam is the world's 20th most active agricultural products exporter - Thailand ranks seventh - the country intends to improve its export competitiveness, she said.

Chakkrit Pumpaisanchai, manager of the business development department of Amata Corp, which operates an industrial estate in Vietnam, said Thailand should cooperate with Vietnam rather than compete with it. And local enterprises should form strategic alliances with counterparts there.

"Vietnam is a good gateway to China, Russia and Eastern Europe. The country's economy is expected to grow by 8 per cent until 2010," he said.

Petchanet Pratruangkrai

The Nation