The survey was conducted in 28 major cities in 15 Asian countries, assessing all major costs incurred by foreign investors including labour, land prices and office space, telecommunication expenses, public utilities, transportation, and taxes.

The report showed that despite more expensive costs in some areas, Viet Nam has an overall cost advantage compared with other countries in the region.

"Viet Nam has great potential because it has a highly-skilled workforce and with moderate wage levels," said the organisation's chief representative, Kenjiro Ishiwata,

Deputy Minister of Labour, War Invalids and Social Affairs Le Duy Dong said that although monthly average wages for Vietnamese workers rose from 120 USD in 2004 to 135 USD in 2005, they were still lower than comparable wages in other surveyed countries.

Electricity costs in Viet Nam were stable last year despite rising rates across Asia. The cost per kilowatt hour remained lower than the regional average, but slightly more expensive than rates in Indonesia, Malaysian and Thailand, according to the report. When calculated in larger increments of 500,000 kWh for example, energy costs in Viet Nam were the lowest in the region last year, giving the country another competitive edge in terms of production costs, it said.

Although international call tariffs have not fallen significantly across the region, Viet Nam has made efforts to lower rates from above the regional average in 2004 (1.95 USD against 1.66 USD) to slightly lower than average (1.65 USD against 1.68 USD), according to the report. While these reductions made Viet Nam more attractive to investors, phone tariffs across the region - with the exception of China and Indonesia - remained relatively high, according to the report.

Office rents across the region increased last year, and Viet Nam was no exception. However, compared with a regional average increase of 14 percent, Viet Nam's 4.5 percent increase was modest. Despite the stable prices, the nation's office rents remained considerably higher than other countries in the region, and a major sticking point for the recent influx of foreign investors, said the report.

Several cost categories associated with supporting services in Viet Nam are often higher than those of neighbouring countries, while the quality of services does not meet investors demand, said Kenjiro Ishiwata. Transportation charges fell considerably last year, but were still seen as relatively high. Shipping rates to and from Ha Noi were the highest of all major cities in ASEAN-member nations, and while HCM City posted lower rates, transportation costs were not regionally competitive, it stated. The cost of shipping a 40-cubic foot container from Hai Phong Port or Sai Gon Port to Japan's Yokohama Port was 1,275 USD last year, 455 USD higher than from Malaysian ports.

On the subject of taxation, the JETRO report pointed out corporate income tax in the region changed little last year, and the average Vietnamese rate of 28 percent remained lower than the regional average level of 30 percent. Income tax in the high-income bracket in Viet Nam, however, at 40 percent are much higher than in other Asian countries.

Although competitive costs may be a major factor for Japanese investors deciding to do business in Viet Nam, they are not enough to keep investors coming, said Ishiwata./.