Sustaining FDI Inflows

8:32:45 AM | 9/16/2021

Despite being still in decline, FDI inflows to Vietnam in August seemed to have been more optimistic. To keep the advantage of this important capital flow in economic development, in addition to retaining popular investors like Japan, South Korea and Singapore, Vietnam is targeting investment attraction at new markets.

Supporting FDI firms to live through the “storm”

According to the Foreign Investment Agency (FIA) under the Ministry of Planning and Investment, foreign investors invested US$19.12 billion to invest in fresh and existing projects and purchase stocks in the year to August 20, down 2.1% year on year. Of the sum, they registered to invest US$11.33 billion in 1,135 new projects, up 16.3% in value but down 36.8% in projects.

Although it was struggling to contain the COVID-19 epidemic, Ho Chi Minh City still ranked second in the country with nearly US$2.2 billion, accounting for 11.4% of the FDI fund in the reporting period and ranked first in investment projects, accounting for 34%. In addition, on August 31, LG Display Vietnam raised its investment fund by US$1.4 billion, the third billion-dollar project in Vietnam this year. The other two billion-dollar projects included US$3.1 billion Long An I and II LNG Power Plant Project (Singapore) and US$1.31 billion O Mon II Thermal Power Plant Project (Japan).

To retain investors, in addition to strongly improving administrative procedures, Vietnam has provided short-term support for investors to mitigate COVID-19 impacts by ensuring freight distribution and labor mobility, especially high-tech workers.

Ho Chi Minh City, which is being hit hard by the COVID-19 pandemic, has quickly taken measures to remove difficulties and facilitated FDI firms to operate effectively. In addition to credit support solutions like further rescheduling the repayment term; exempting/reducing interest rates and bank fees; supporting businesses to access interest-free loans, the biggest city of Vietnam has encouraged enterprises to organize safe business models like “Three on the spot” and “One route, two destinations”, and “Four greens” (green human resources, green roads, green places to work and green places to live).

Bac Giang province, which has just recovered from the epidemic, has joined hands to provide support and solutions for businesses that are facing difficulty in employment, COVID-19 testing and control. At the same time, the province has regularly met and discussed matters of concern with investors to promptly solve problems in the quickest and best manner.

Furthermore, believing that an effective epidemic control will be a passport for it to welcome giant investors, Vietnam is doing “vaccine diplomacy” very well and accelerating the vaccination rollout to reach herd immunity. This not only creates a reliable address and composure for foreign investors to boost their investment and business operations in Vietnam, but also draws more FDI flows into Vietnam in the coming time.

Wooing new investors

The eight-month FDI picture highlights a bright spot. Beside Singapore, Japan and South Korea, the top investors in Vietnam, some new investors started to invest in Vietnam, particularly those from Albania. In spite of being a small project, this has also proved the appeal of Vietnam's investment destination notwithstanding the complicated epidemic development.

Additionally, to further improve investment cooperation between Vietnam and its Middle East partners, the Ministry of Planning and Investment coordinated with the Ministry of Foreign Affairs to host a webinar on strengthening Vietnam - Middle East investment cooperation where the former proposed many cooperation approaches in which the ministry studied cooperation models with third parties to join hands in large projects in Vietnam (similar to Nghi Son oil refinery project) or build a cooperation mechanism to connect large Middle East investment funds for giant infrastructure development investment in Vietnam.

Not only from Europe or the Middle East, opportunities for Vietnam to draw FDI flows from the United States are also very open following the Vietnam visit by Vice President Kamala Harris in late August. Earlier, at the Government's online business meeting, Mr. Vu Tu Thanh, Regional Executive Manager of the US - ASEAN Business Council, also affirmed that all US firms have a long-term investment vision in Vietnam and want to generate more investment opportunities in the country.

At the Vietnam - Austria Business Forum on September 6 when the high-level delegation of the Vietnamese National Assembly attended the 5th World Conference of Speakers of Parliament (WCSP5), Mr. Richard Schenz, Vice President of the Austrian Federal Economic Chamber, also affirmed that the Austrian businesses are eager to find new investment opportunities in Vietnam to avoid supply chain disruptions. At the same time, we hope that the two sides will jointly make the most of investment advantages and new opportunities.

In its Taking Stock report on Vietnamese economic performance released by the World Bank (WB) in August 2021, the WB stated that FDI inflows into Vietnam are stable relative to other countries in the world. This shows investor confidence in Vietnam’s economic potential. However, to sustain this important capital flow, Vietnam needs to further improve its competitiveness and enhance the capacity of domestic enterprises to join the value chains with FDI firms.

By Thu Ha , Vietnam Business Forum