The Foreign Ministry issued the warning as Vietnam’s inflation rate surged 25.2 percent year-on-year in May, while the January-May inflation rate climbed to nearly 16 percent, compared with an inflation rate of 12.63 percent in 2007, the Liberty Times reported.

“In light of increasing inflation in Vietnam, Taiwan investors should approach business opportunities there with caution,” the ministry said.

Taiwanese investment in Vietnam hit US$10.9 billion in April, making Taiwan Vietnam’s 3rd-largest source of foreign capital after South Korea and Singapore, according to Vietnam’s figures.

There are 1,800 Taiwanese firms investing in Vietnam, but the actual number could be as high as 3,000 because many Taiwan firms do not invest under their own names, the Liberty Times quoted Burton Chiu, director of the ministry’s investment services department, as saying.

Despite the Foreign Ministry’s warning, the daily said, some large Taiwan firms plan to go ahead with their investment plans in Vietnam.

Taiwan’s petrochemical giant the Formosa Plastics Group said accelerating inflation in Vietnam will not deter it from constructing a steel plant there next month.

Formosa is also considering building an oil refinery and ethylene plant in Vietnam, chief executive officer William Wong said Friday, the Liberty Times said.

However, Taiwan’s Pacific Hospital Supply Co. and Taiwan Sugar Corp. have postponed plans to invest in Vietnam, as Hanoi is trying contain an inflation rate that’s at its highest level since at least 1992, the Economic Daily News said Friday.

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