Vietnam’s Tourism Industry in Trouble?

July 12, 2013 Posted by Vietnam Briefing Reading Time: 2 minutes

Jul. 12 – Vietnam’s tourism industry has seen consistent growth over the past several years following an inflow of foreign investment starting in 2008, but trouble seems to be looming over the horizon for this important sector.

During the last decade, the tourism industry has contributed upwards of 6 percent annually to Vietnam’s total GDP. In fact, according to Hoang Tuan Anh, Vietnam’s Minister of Culture, Sports and Tourism, foreign direct investment (FDI) in the tourism sector reached a total of US$10 billion in 2012 – good for 5 percent of Vietnam’s total FDI inflows.

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Vietnam’s tourism industry is largely centered in the cities of Ba Ria–Vung Tau, Da Nang and Quang Nam, each of which houses numerous foreign hotel and resort chains. Later this month, the biggest tourist complex in Vietnam – which is reportedly worth over US$4.2 billion – is scheduled to open up in Ba Ria-Vung Tau.

Despite international tourists continuing to be attracted to Vietnam, FDI into the tourism sector has started to come under pressure this past year. According to data from the Foreign Investment Department, registered FDI inflows into Vietnam’s real estate sector in 2012 – which includes tourism – have decreased by US$1.7 billion year-on-year.

To make matters worse, several high-profile tourism projects have even been postponed or revoked, including a large US$1.3 billion theme park funded by American company Good Choice, and the Asia Pearl project funded by the Trustee Suisse Group (valued at US$2.6 billion).

Vietnamese Minister of Planning and Investment, Bui Quang Vinh, is aware of this trend.

“Cheap labor is no longer an advantage [in the country] because Vietnam’s economy is growing, per capita incomes are increasing and so are minimum wages – which scares away many potential FDI firms,” he noted. “As the advantages [start to] disappear… the number of newly registered FDI projects [will go] down.”

These changes are not going unnoticed throughout the country as well, with Professor Mai Nguyen, President of the FDI Business Association in Vietnam, affirming the importance of continuing to develop the tourism industry.

“There are a lot of things to do with attracting investment in the hospitality and tourism sector because this is one of the critical issues to promote the development of Vietnam,” Professor Nguyen said.

The tourism industry plays an important role in Vietnam’s local economy and supplies over 2 million direct jobs in the country.

According to the Vietnam National Administration of Tourism, Vietnam has already welcomed 3.54 million foreign tourists in 2013, and expects to see a slight increase in the total year-on-year number of visitors to its resorts and exotic destinations.

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