Optimistic Expectations for FDI Inflows

9:16:48 AM | 2/5/2021

In 2021, Vietnam is assessed to have many opportunities to attract FDI flows redirected from other economies because many investors already planned investment expansions and fresh investments. To catch this wave of investment flows, Vietnam needs appropriate solutions specific to the new context.

Bright spots on the investment map

The pandemic caused an unprecedented shock to all aspects of supply, demand and foreign investment and resulted in project delays. In this context, some Southeast Asian countries, including Vietnam, have become bright spots on the foreign direct investment map.

According to the General Statistics Office (GSO), Vietnam attracted US$28.5 billion of foreign direct investment (FDI) in 2020, down 25% from 2019. Notably, existing projects added US$6.4 billion in the year, up 10.6% over 2019. As many as 1,140 projects registered to adjust investment capital, down 17.5%. typical projects in 2020 included Bac Lieu LNG Power Plant in the Bac Lieu LNG Thermal Power Center (Singapore) that registered to invest US$4 billion; South Vietnam Petrochemical Complex (Thailand) in Ba Ria - Vung Tau province that scaled up the investment fund by US$1.386 billion and West Lake Urban Center (South Korea) in Hanoi that registered to increase the investment fund by more than US$774 million.

According to the Ministry of Planning and Investment, many foreign investors expressed their interest, trust and wish to invest in Vietnam. Currently, nearly 300 foreign companies around the world planned to expand investment or make new investments or are seeking investment in Vietnam. Among them, more than 60 corporations initially carried out new investment/expanded investment in Vietnam, including giants like Toyota, Ford, Honda, Hyundai, Mazda, Mitsubishi, Foxconn and Samsung.

Do Nhat Hoang, Director of the Foreign Investment Agency (FIA) under the Ministry of Planning and Investment (MPI), said, Vietnam has been chosen among potential Asian locations for redirected global manufacturing and supply chains. In addition, with the good control of the COVID-19 epidemic, Vietnam has made foreign businesses and investors confident of its quick recovery and production restart. He hoped that 2021 will witness more investors coming to Vietnam to realize their investment movement, especially when the Prime Minister allowed reopening some international flight routes to welcome experts to Vietnam in the context of COVID-19.

2021 prospects

The 2021 FDI prospect of Vietnam will be very bright as many large, medium and small investors from developed countries gradually divert investment into Vietnam. Taking advantage of free trade agreements that Vietnam signed, FDI projects will be further directed towards Vietnam in the near future.  According to experts, 2021 is a year of adaptation to "clear the nest for eagles". And the prerequisite is good control of epidemic, concerted coordination of fiscal and monetary policy, and effective public investment for spur private investment.

Remarking on FDI inflows into Vietnam in 2021, Nguyen Minh Cuong, chief economist of the Asian Development Bank (ADB) in Vietnam, said that more FDI flows will come to Vietnam. This will promote Vietnam's economic modernization and improve its economic competitiveness in the global value chain.

According to Professor Nguyen Mai, Vietnam’s prospect of FDI attraction is very optimistic in the coming year. Not only giants, many small and medium investors from developed countries such as Japan, South Korea and the United States are also very important. Small FDI projects which take advantage of free trade agreements that Vietnam signed will continue to enter Vietnam next year and they all are worthy of recognition and respect.

Deputy Minister of Planning and Investment Tran Quoc Phuong also affirmed that, by 2021, many investors will come to Vietnam to realize their move. In particular, joining many new-generation free trade agreements such as EVFTA, CPTPP and UKVFTA, Vietnam has a great opportunity to integrate and participate more deeply into the world production networks and choose quality FDI projects to climb the ladder of global value chains.

According to the Ho Chi Minh City Office of the Japan External Trade Organization (JETRO), 30 businesses are supported by the Government of Japan to increase production in Southeast Asia in the second phase of the COVID-19 epidemic support program for diversification of supply chains. Notably, 15 out of the 30 businesses funded by this support program chose Vietnam as their destination. In addition, large infrastructure, green energy and digital economy projects in Vietnam are also drawing interest from US businesses. A wave of high-quality international investment into Vietnam is expected to kick in.

The opportunity to catch the shifted investment wave is clear, but the world is volatile and fast-changing, said Dr. Vo Tri Thanh, member of the Prime Minister's Economic Advisory Group, Head of the Institute for Brand and Competitiveness Strategy (BCSI). Investment flows are moving, so if we do not take the right action, we cannot grasp them. Therefore, Vietnam needs to improve infrastructure and the investment and business environment. Besides, the Vietnamese business community in general and foreign-invested enterprises in particular have high expectations of government-backed business support solutions and economic stimuli.

Concurring with this point of view, Mr. Nguyen Bich Lam, former General Director of the General Statistics Office, said FDI attraction must be placed in the socioeconomic development strategy in 2021 - 2030. FDI priority must be made clear for specific industries. If we can do a business well, we should not attract foreign investment for it.

By Thu Ha, Vietnam Business Forum