The country’s entry into the World Trade Organization is expected to draw more investments.

Already air accessibility and hotel rooms are being increased in anticipation of the surge in business travel. Bill Bainbridge takes a look at the main economic drivers.

Vietnam’s economy is on a roll. For a decade the communist nation has averaged better than seven per cent economic growth a year and the party looks set to continue.

The Asian Development Bank’s (ADB) most recent Asian Economic Outlook, published in early April, predicted at least 7.5 per cent growth for Vietnam for each of the next three years.

Growing domestic demand from the population of more than 80 million and booming exports are the main drivers of the impressive growth figures, according to the ADB.

And foreign firms are getting in on the act. The ADB surveyed foreign-invested businesses in Vietnam and found more than two-thirds plan to expand over the next three years.

A key ingredient in improving the foreign investment environment is Vietnam’s imminent World Trade Organization (WTO) entry. Vietnam is still pushing to enter the world body before the end of this year. Analysts suggest it is unlikely, but the country should enter the WTO by 2006 at the latest.

The surge in business is fuelling new air links, a point made by Singapore prime minister, Lee Hsien Loong, on the completion of WTO talks. Singapore is already Vietnam’s top investor with registered capital of more than US$8 billion and Mr Lee reportedly pressed for better air links during the WTO talks.

Daewoo Hotel Hanoi general manager, Mr Peter Martin, said he expected new links from Singapore and Malaysia in the near future.

“Everybody’s definitely bringing on more flights, business confidence is high and the market just gets stronger and stronger,” he told BTN Asia-Pacific.

Intra-Asian travel has continued to grow, reflecting the source of Vietnam’s foreign investment. After Singapore, Taiwan, Japan, South Korea and Hong Kong round out the top five investors list. France, with more than US$2 billion in registered capital, is also a large investor as is the Netherlands with US$1.8 billion.

Vietnam also has a rapidly growing trade with the US, which now has registered capital of around US$1.3 billion.

Thai Airways International started direct flights linking Bangkok and New York on May 1. The 21-hour service operates six times weekly. With Bangkok as the gateway to Indochina, the new service is also expected to benefit Vietnam.

That comes on the back of United Airlines’ Boeing 747-400 service, launched last December, which links San Francisco to Ho Chi Minh City via Hong Kong. The flag carrier, Vietnam Airlines, hopes to begin direct flights to the US sometime this year, or in 2006.

The airline has already scheduled its first direct flights to Frankfurt to begin on June 20.

Vietnam National Administration of Tourism deputy director of the Tourism Promotion Department, Mr Nguyen Quy Phuong, said the country was attracting more MICE (meetings, incentives, conventions and exhibitions) travellers through its competitive pricing.

“The price for international brand hotels here is very cheap, roughly US$100 to US$150 per room, and we have some very good convention centres,” he said. Strong demand for rooms had reignited stalled projects and would attract more investment in hotels in the future, he said.

The Sheraton Hanoi opened 156 rooms in March last year after sitting idle since 1998, and will open another 143 rooms later this year.

The InterContinental Hotels Group also secured a deal to take control of an unfinished 327-room property set for a late-2005 opening.

In Ho Chi Minh City, Park Hyatt, with 259 rooms, is due to open in May and Rex Hotel is in the process of adding 80 rooms and upgrading to the five-star category.

But strong demand should fill those rooms, according to Mr Phuong. “For the peak season last year all the four- and five-star properties in Vietnam were full. We still need more top hotels and more convention properties,” he said.

More competition would not be a concern to hotel owners, according to Mr Martin. “We would not be concerned at all. The demand will soak up the extra rooms,” he said.