FDI Attraction: Positive Signals for 2021

10:59:29 AM | 3/4/2021

Despite complicated COVID-19 pandemic developments, many large-scale FDI projects arrived in Vietnam in early 2021. Vietnam is increasingly becoming a bright candidate for transition of the value chain in Asia and a really bright actor of the regional economy.

Accommodating major investors

According to the Foreign Investment Agency (FIA), foreign investors spent US$5.46 billion to invest in fresh and existing projects and buy shares in the year to February 20, equal to 84.4% of the value in the same period of 2020. Foreign direct investment (FDI) projects disbursed US$2.5 billion in the period, up 2% year on year.

By industry, foreign investors invested in 17 industries. The processing and manufacturing industry drew the most FDI funding with over US$3 billion, accounting for 55.7 % of the total registered FDI funding, followed by the electricity production and distribution sector with US$1.44 billion or 26.5% of the total. Real estate and science-technology followed with nearly US$485 million and nearly US$153 million, respectively.

Notably, in the first months of 2021, many giant FDI projects were invested in Vietnamese localities like Hai Phong, Bac Giang, Quang Ninh and Dong Nai. On February 5, Quang Ninh Economic Zones Authority awarded investment license to the US$30-million Lioncore factory project. In the first quarter of 2021, the authority was expected to guide investors to complete procedures for obtaining investment certificates for six new investment projects and one existing expanded cashew project with a total registered capital of over US$200 million. These projects are engaged in the processing and manufacturing industry.

In Hai Phong City, in the early days of February 2021, the People's Committee also licensed LG Display Vietnam Hai Phong Co., Ltd to invest US$750 million in LG Display Hai Phong Project. Previously, in Dong Nai province, in the first 13 days of 2021, 11 FDI projects, including three fresh projects and eight existing projects, were licensed to invest more than US$226 million in the province, the highest in the same period of time in five years in the province.

Besides, some other big projects were licensed in the first two months of 2021, including US$1.31 billion O Mon II Thermal Power Plant (Japan), US$312 million expanded Radian tires manufacturing project (China) in Tay Ninh province, and US$270 million Kodi New Material Vietnam project (Singapore), which manufactures tablets and laptops in Bac Giang province.

Minister of Planning and Investment Nguyen Chi Dung said, in the coming time, this foreign investment will add new production capacity to the economy to spur growth. This is also the time Vietnam must select and invest in high technology without compromising the environment.

Feasible target of US$28.5 billion FDI fund in 2021

Given early positive signals, the target of US$28.5 billion of registered FDI funds and US$19.9 billion of spent funds is completely within reach, according to experts.

According to a report by the Foreign Investment Agency (FIA), in the first two months of 2021, the transition of the Investment Law 2014 and the Investment Law 2020 affected greenfield and existing foreign investment projects in Vietnam. The 2020 law, effective from January 1, 2021, has created a large opening to attract investors to Vietnam. Accordingly, the law has notable changes in investment incentive policies. Compared to the old regulations, the new rule adds new industries to the scope of preferential investment incentives, like products formed from scientific and technological research being categorized in the list of industrial products supported and prioritized for developing tertiary education and manufacturing medical equipment. New policies on beneficiaries of investment incentives are adjusted toward more focus on high-tech and innovative startup projects.

Furthermore, advantages also come from the continued improvement of infrastructure of industrial parks, export processing zones and economic zones across the country. By the end of 2020, the Prime Minister also approved 19 coastal economic zones covering a total area of about 871,000 ha.

In addition, free trade agreements such as the EU - Vietnam Free Trade Agreement (EVFTA) and Regional Comprehensive Economic Partnership (RCEP) have opened a new, broad and comprehensive cooperation direction for Vietnam.

In addition to positive impacts created by policies and guidelines of the central government, localities are very actively preparing to accommodate investors. They have reviewed and adjusted their plans for economic and industrial zone development to ensure available land for new projects, focusing on mobilizing enterprise resources to develop technical infrastructure of industrial zones. They also quickly grasp new developments to provide timely, effective support for investors to deal with emerging matters, facilitate their investment and increase their appeal to investors.

In 2021, the Ministry of Planning and Investment will also conduct a FDI project review, focusing on assessing regulatory compliance, environmental protection and anti-transfer pricing. Incentives for FDI enterprises will be further reviewed and planned to cut supports for low-tech, energy-consuming, environment-polluting projects.

By Thu Ha, Vietnam Business Forum