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China and India are two economic engines that
will drive Asia's growth over the next decade. Strong
gross domestic product (GDP) expansion, the active
pursuit of economic reforms to attract foreign direct
investments (FDIs) and the sheer size of their
domestic markets, buying power and consumer
demand have attracted significant attention from
global investors and multinational corporations.
Vietnam, although it is smaller than China and India
in terms of economic prowess and market size,
is another promising country for investment.
China's economy has been growing rapidly over
the last few years, with GDP growth hitting
9.5% in 2004. FDIs increased by 13.3% to reach
US$60.6 billion during the year while the country's
foreign exchange reserves reached US$609.9 billion
at end-2004, some 51% more than the previous year.
However, China's phenomenal growth has raised
fears of an economic hard landing. Stabilising policies
were introduced in April 2004 to slow the pace of
investment and production. These measures have
been fairly effective in easing economic pressure.
Growth in fixed asset investment has slowed down
considerably from 30 - 50% in early 2004 to average
25.8% for the whole year. Inflation has also declined
from 5.3% in July to 2.4% in December 2004 and
to a further 1.9% in January 2005.
While the current stabilising measures will likely
tame economic growth in the short-term, the longer
term outlook for China remains bright, especially for
sectors such as property, information technology
(IT), financial and healthcare services.
Similarly, the Indian economy has rebounded strongly
over the last decade, after emerging from the crisis
period in early 1990s when its foreign reserves were
almost depleted. GDP growth was a strong 6.5%
for 2004, driven by continued industrial expansion
and infrastructure spending which greatly benefited
the construction sector. Its foreign exchange reserves
have also risen to about US$130 billion as at end
December 2004.
India's strong economic growth is expected to
remain intact over the next few years. Sectors that
are potential growth drivers include IT exports and
business process outsourcing.
India is ranked among the top four Asian investment
destinations and the top 10 developing country
recipients of FDIs in the 2004 World Investment
Report of the UN Conference on Trade and
Development (UNCTAD). Its share of global software
application development, one of the largest
businesses for IT companies, is 16.4%. With the
global shift in FDI flows moving from manufacturing
to the services sector, India is set to benefit from
this trend.
Vietnam, with half of its population of 80 million
under 35 years of age and a literacy rate of 93%, is
poised for an economic take-off. Already one of the
fastest growing countries in Southeast Asia with
GDP growth of 7.7% in 2004, Vietnam holds a
wealth of business potential and opportunities. The
country's investment climate is enhanced by the
government's commitment to economic reforms,
which creates a business environment conducive
for foreign investors. According to the Ministry of
Planning and Investment, total FDIs increased by
35% to reach US$4.2 billion in 2004. Over 5,000
foreign invested companies are operating in Vietnam
currently. Besides targeting to become a member
of the World Trade Organisation and benefit from
full realisation of Asean Free Trade Area in 2006,
Vietnam plans to maintain an annual GDP growth
of 7.5%- 8% and to create eight million jobs over
the next five years.
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