Update: 09:51 | 09/09/2020
After slowing down in the first few months of 2020, FDI inflow into Vietnam has increased sharply in recent months.
According to a report of the Ministry of Planning and Investment (MPI), as of August 20, Vietnam’s FDI attraction reached US$19.54 billion, which is equal to only 86.3% of the figure from the same period last year, but is seen by experts as a sign of a new wave of investment in Vietnam.
Workers operating a production line at the Jasan Textile & Dyeing (Vietnam) Co.,Ltd.
However, in order to take advantage of this new investment wave, experts have suggested that Vietnam continue to reform institutions to create favourable conditions in the business environment, as well as remaining proactive and consistent in investment attraction policies. At the same time, domestic enterprises must be more proactive as well.
Only in this way can Vietnam utilise the golden opportunities to welcome foreign investors to come for cooperation and investment, thus turning potential into economic power while participating further in the global value chain.
Do Nhat Hoang, Director of the MPI’s Foreign Investment Agency, said that according to the assessment of the United Nations Conference on Trade and Development (UNCTAD), global investment in 2020 could slump by up to 40%, and the world’s economies may register declining and even negative growth.
Meanwhile, as of August 20, the total FDI inflows in Vietnam reached nearly US$20 billion, down only 13% year-on-year, which is a very low level of decrease compared to the rest of the world and other countries in the region. In particular, the disbursed capital stood at US$11.3 billion, down only 5.1% from the same period in 2019.
These positive signals show foreign investors’ faith in the investment environment in Vietnam. The country’s FDI sector only reported a slight fall in its trade revenue, with export turnover reaching US$113.3 billion, down 4.5% year-on-year, and import turnover decreasing by 5.3% to US$90.7 billion. This proves that despite the numerous difficulties brought by the Covid-19 pandemic, FDI enterprises have still maintained their production and business activities in a relatively good manner, without suffering sharp declines.
The aforementioned figures also demonstrate that the Vietnamese Government has made effective efforts to improve the domestic investment environment in recent years and has been effectively implementing the dual goal of fighting the disease and promoting economic development.
According to Do Nhat Hoang, the attractiveness of Vietnam’s current business climate stems from internal economic factors and the impacts of external factors.
In terms of internal factors, Vietnam currently holds advantages in its investment environment, including political stability, rapid and sustainable economic growth, abundant human resources, a large market, competitive costs, attractive incentive policies, extensive economic integration, and favourable geographical location.
An additional factor is the effort of the whole political system, from the central to local levels, in improving the business climate and reforming administrative policies and procedures to create the most favourable conditions for foreign investors to operate successfully in Vietnam.
In particular, Vietnam’s efforts to effectively control the Covid-19 pandemic in recent times have also helped to strengthen faith among foreign investors and increase the country’s reputation as an attractive and safe investment destination.
Regarding external factors, firstly, the trade conflict between major economies has caused international corporations and enterprises to relocate their production establishments to avoid high tax rates. In addition, the pandemic and its serious consequences have driven countries and international corporations to accelerate investment restructuring, aiming to lessen dependence on a single country or partner.
Some developed countries, such as the United States, Japan and the Republic of Korea, have issued preferential policies and support packages to call on companies to move their production lines back home or invest in a third country to diversify the supply chains. In particular, Vietnam has many opportunities to catch this shifting wave thanks to the country’s advantages in terms of the investment environment as well as its recent success in containing the disease.