Don't Passively Wait for Investors to Come

2:04:56 PM | 5/13/2020

Despite causing negative socio-economic impacts, the Covid-19 pandemic is also considered an opportunity for Vietnam to receive flows of foreign investment, especially those shifted from China. However, whether Vietnam can take advantage of this opportunity or not depends very much on its actions.

Golden opportunity to receive shifted FDI inflows

According to a report by Foreign Investment Agency, Ministry of Planning and Investment, as of April 20, the country received US$12.33 billion in the first four months of 2020, equaling 84.5% compared to the same period in 2019. Newly registered and adjusted capital increased over the same period, while foreign investors' share purchase capital decreased sharply, reducing the total investment inflows by 15.5% compared to the same period last year. However, in terms of value, the registered FDI capital in the first four months of 2020 still increased in comparison with the same period of 2016 – 2018, up 52.3% against 2018, 16.4% against 2017 and 79% compared to 2016.

Experts believe that Vietnam has great prospects to attract FDI in 2020. Favorable factors include the international community’s strong appreciation for Vietnam’s effective pandemic containment efforts, the country’s stable political situation and especially the Government’s determination to aggressively improve the business and investment environment. In addition, Vietnam has been participating in a series of new-generation free trade agreements (FTAs), including the Vietnam-EU FTA (EVFTA), which have been creating foundations and platforms for foreign investment inflows into Vietnam.

In addition, the trend of shifting FDI out of China to Southeast Asian countries, including Vietnam, due to the dual effects of the U.S.-China trade war and the Covid-19 pandemic outbreak, has been increasingly evident, and is accelerating. Vietnam is considered a promising destination since the wave of factory relocations from China began. The recent JETRO survey results show that 63.9% of Japanese enterprises plan to expand production and business in Vietnam in the next 1-2 years. A survey by the German Chamber of Commerce in Vietnam also shows that 72% of German businesses in Vietnam will continue their investment plan in the country and 27% of them will recruit more personnel.

Most recently, speaking at the Conference of the Prime Minister with businesses, Minister of Planning and Investment Nguyen Chi Dung also confirmed that currently, Vietnam's reputation and position are being highly appreciated by the international community thanks to the success achieved from the prevention and control of the recent Covid-19 pandemic. This is a "golden opportunity" for the world to know about Vietnam as a safe investment destination, ready to welcome capital flows. Also at this conference, representatives of European, Japanese, Korean, American businesses in Vietnam confirmed their interest in Vietnam as an investment destination.

The Ministry of Planning and Investment forecasts that FDI into Vietnam will increase again by the end of 2020, creating momentum for 2021. Vietnam can make good use of the trend of shifting global production chains to attract FDI to some new fields in Vietnam, such as medical equipment, biology, pharmaceutical chemistry, biochemistry, pharmaceuticals.

No passive waiting for investors

According to Prof., Dr. Nguyen Mai, Chairman of Vietnam Association of Foreign Investment Enterprises (VAFIE), the opportunity to welcome the shift in FDI inflows is real. However, the implementation of this depends heavily on Vietnam's plans and actions.

Accordingly, Vietnam needs to take stronger measures and promote supporting industry development. Economic zones and industrial parks must have land, infrastructure and information available. We have to ensure technology, environment and labor safety requirements; along with publicity, transparency, simplification of administrative procedures to support investors.

In addition, this is also the time not to wait for the movement of capital flows, but to take the initiative in finding high quality investors. Investment promotion agencies should proactively work with foreign investors who have plans to invest in Vietnam to discuss, orient and unify the preliminary investment procedures.

According to Dr. Vu Tien Loc, President of Vietnam Chamber of Commerce and Industry (VCCI), in order to stand ready for flows of investment capital from China, Vietnam must come to the "headquarters" of foreign investors to promote investment. “Don't passively wait for them to come to you. At the same time, we should develop supporting industries and small and medium-sized enterprises to connect into supply chains with foreign businesses,” said VCCI President Loc.

Besides, Vietnam also needs to focus on attracting high quality sources of capital, especially capital from developed countries in the world. In particular, it is necessary to improve the localization rate of FDI enterprises, so that FDI enterprises' investment activities will bring higher added value to the country.

Recently, at the Government's regular meeting in April 2020 and the regular Government press conference in early May, Prime Minister Nguyen Xuan Phuc also requested to focus on promoting FDI attraction as major partners are changing their business investment strategies. The Prime Minister also mentioned boosting FDI attraction, especially high-quality FDI, as also one of the five measures to help the economic recovery at the Government at the Prime Minister's Conference with businesses as the disease has been basically contained in Vietnam.

By Ha Thu, Vietnam Business Forum