Loading in 2 Seconds...
Loading in 2 Seconds...
Comparison of FDI in four countries in Asia - China, India, Thailand and Vietnam Presented by Krist Boonjunwetvat 5004640487 Peerut Sunirand 5004640750
Criteria for FDI comparison • Wages • Intellectual property • Requirement for a local partner • Taxes • Domestic market • Bureaucracy • Safety • Environment
Wages • India is the least expensive for unskilled labor, $34 base salary per month. • While the minimum wage in China, Thailand and Vietnam outside of the urban area is about $85-90 base salary per month (approximately $4 per day). • Labor laws in India are also written to attract more FDI. Note: Investor needs to concern about government required benefit and employment benefit as well.
Intellectual property • China continues to have serious problems with IP protection. Laws do exist but China has conflicts between its government and private sectors. • India is much stronger on IP protection and has a much more developed legal system with more predictable outcomes than China. • Vietnam also continues to have problems with IP protection similar to China. • Thailand is more unified nationally and has less conflict between its levels of hierarchy. Although Thailand has minor problems with IP protection, in generally is much better than China or Vietnam.
Requirement for a local partner • Often, local officials will encourage you to consider a local partner and introduce them, but there is no requirement for local ownership on most investments in Asia today. • Investing in China or Vietnam today can and do generally establish a wholly owned subsidiary (a wholly owned foreign enterprise). • Certain businesses in India are still restricted to Indian nationals only, but for over 90 plus percent of businesses they are open to foreign investors and there is no requirement for a local partner. • Thailand has long not required a local partner.
Taxes • Taxes typically are higher in India than in China. • China generally only offers a two-year exemption and three years with a 50% reduction. • In Thailand, the area outside Bangkok and its suburbs offer eight year exemptions plus five years at 50% off. • Considering the Value added tax (VAT) - In china VAT is 17%, while India is 12.5%, Vietnam is 10-mid 20s%, and Thailand is only 7%.
Domestic Market • China and India, in statistical, have a high number of population but less consumption. • On the contrast, Thailand, which is smaller relative to those countries, has a high number of consumptionbecause Thailand activate domestic market by FTA with many counties, such as India, China, Australia and New Zealand.
Safety • There are safety rules in China, Vietnam and elsewhere but enforcement tends to be below standard. • Workman's Compensation laws exist and are generally enforced against foreign companies but less so if at all against Chinese or Vietnamese owned firms. • India has its own problems with safety as contract workers are used to circumvent safety.
Bureaucracy • Licenses, permits and approvals in China are generally quickly issued and acted upon, whereas in India, it still can be very difficult to get a project through on a timely basis. • Thailand is much more business friendlyand has a very easily understood system and quick procedures. • Communications costs which covers 5% of all expenses. Most countries in SE Asia, with the exception of Vietnam, have reduced their costs as has China. • ShippingCosts, the cost of shipping from China and Thailand to be comparable in price, while Vietnam and India tend to be higher for shipping about $300 or more per 40 foot container.
Environment • China and Vietnam have laws mandating that all firms have to follow basic EP guidelines. But in practical,These are most often enforced against new foreign-owned factories while existing locally owned factories get much less attention. • India also has distinct problems with pollution but is doing better than China because it has a freer press and more active advocacy groups. • Thailand has strict guidelines, especially for water and chemical usage, but it still has instances of corruption when it comes to enforcement.
Conclusion • For any companies seeking to find low-cost quality suppliers in Asia, China might not be the best alternatives. Further considering about all aspects or criteria is required so that investors can evaluate all costs and other factor and improve performance effectively.
References • http://www.business-in-asia.com/wire_journal_nov2005.html.