Viet Nam Human Rights
FDI capital keeps flowing into VN
24/3/20
In the first two months of 2020, the electricity, refrigeration and manufacturing industries continued to take the lead in attracting foreign direct investment (FDI) to Viet Nam.
According to economic experts, this stems from the advantage of Viet Nam’s successful signing of the European Union-Viet Nam Free Trade Agreement (EVFTA).
In addition, the wave of shifting investments to Viet Nam among foreign companies, which has been taking place since late 2019, is being further accelerated in early 2020.
FDI inflows maintain growth momentum
According to statistics by the Ministry of Planning and Investment, new and additional FDI pledges to the electricity, gas, steam and air conditioning production and distribution sectors have reached US$3.84 billion so far this year, accounting for 68.1% of the total registered capital.
The manufacturing industry has attracted approximately US$1.43 billion, representing 25.3% of the total, while FDI inflows in the remaining industries have hit US$371.8 million, making up 6.6%.
Recently, 38 countries and territories have their projects newly licensed in Viet Nam. Of which, Singapore rose to become the largest investors with more than $4.11 billion, accounting for 82.2% of the total investment capital. China followed with $418 million, accounting for 8.4 percent.
By 2019, the EU was the fourth largest investment partner in Viet Nam with over 2,240 valid projects with total registered capital at $24.67 billion, or 7.6 percent of the total FDI capital invested in Viet Nam.
The EU has invested in 18 out of 21 industries according to the national economic classification system and is present in 54 provinces and cities across the country.
Its survey released last February showed that Viet Nam is the top destination of Japanese enterprises this year. Particularly, among 122 enterprises participated in the survey said that they will move their factories.
Of which, 62.7% of the source of the movement is China while the destination is Viet Nam with 42.3%, followed by Thailand with 20.6%, the Philippines with 18.6%, and Indonesia with 16.5%, according to the Japan External Trade Organization (JETRO).
However, unlike EU investors, investors from Japan have chosen a more diverse investment path in Viet Nam. Accordingly, Japanese firms are investing strongly in the processing and manufacturing sector, in combination with supporting domestic enterprises to improve their capabilities to deeply integrate into the global supply chain.
Increasing the number of businesses manufacturing supporting products in Viet Nam will enable Japanese companies to raise the supply rate of domestic supporting industry products, thus creating a solid foundation for Japanese end-product manufacturers when entering the Vietnamese market.
From another perspective, Japanese consumer goods companies are also covering their presence through Japanese retail-distribution systems, or opening a series of stores. For example, Aeonmall has changed its investment strategy and has identified Viet Nam as its most important market in Southeast Asia.
Accelerating the removal of obstacles for businesses
According to Mr. Nicolas Audie, Chairman of the EuroCham, by launching the national public service portal, the Vietnamese Government has created a close connection between the Government, people, and enterprises, accelerating the progress of administrative procedure reform.
The country needs to quickly invest in modern devices for specialized inspection to improve the ability of automated inspection and shorten the time of customs clearance.
Regarding this matter, the Ministry of Industry and Trade said that authorities have been reviewing the Intellectual Property Law to revise in line with deeper commitments in the EVFTA and other new-generation free trade agreements (FTAs) to ensure the optimal benefits committed with investors and countries members in the FTAs.
At the same time, they will also review other important laws, such as the Law on Investment, Law on Enterprises, Law on Land, and some laws on tax to accord with the regulations and comply with the principles of cooperation in the framework of the FTAs that Viet Nam has signed.
Considering the general economic development strategy in Viet Nam, it can be seen that the stability currently aimed at by the country to extensively integrate into the world economy through bilateral and multilateral trade agreements will continue to create many opportunities for trade and investment in the near future.
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All comments [ 20 ]
Vietnam has never before had the opportunity to receive such large investment flows.
With the wave of foreign investors relocating their factories out of China, in addition to Vietnam’s joining next-generation FTAs, foreign capital will continue flowing into Vietnam in the time to come.
if Vietnam can absorb the huge capital and grab the opportunity.
Many problems still exist, including the underdevelopment of infrastructure.
The infrastructure problems in Vietnam, including air traffic congestion, the underdevelopment of waterways, and the heavy reliance on road transport all affect the foreign investors’ decision to relocate their investment to Vietnam.
Fueled by continuous growth, Vietnam continues to attract record foreign direct investment (FDI).
FDI in Vietnam in 2019 reached US$38.2 billion an increase of 7.2 percent as compared to the same period in 2018.
Investment has been mainly driven by the US-China trade war.
Vietnam is committed to an ambitious investment plan to develop overall infrastructure in major industrial poles in the country, which will ease doing business and improve logistics.
coupled with the recent entry into force of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the EU and Vietnam FTA (EVFTA) (expected to be officially approved in June) will provide significant opportunities for both inbound and outbound investment for the next few years.
it is likely that Vietnam will continue improving its legal framework to adhere to transparency requirements imposed by the aforementioned agreements, especially in relation to Intellectual Property Rights (IPR) protection.
Asian countries represent the lion’s share of FDI into Vietnam.
An important point to note is that China has been increasing its investment in Vietnam rapidly.
This can partly be attributed to the US-China trade war, but some analysts say that China is also pushing investment through Hong Kong as Vietnam becomes more cautious about Chinese investment.
North Vietnam is rapidly consolidating its position as a main industrial hub for the electronics and heavy industry, which are stimulating the development of a reliable supply chain in the area.
Vietnamese firms invested nearly US$183 million in 69 projects overseas in the same period, showing that local firms were also becoming more internationally competitive.
As the US-China trade war continues, Vietnam has become one of the fastest growing sources of American imports in the first quarter of the year.
as numerous investors are tapping into Vietnam, cost of labor is likely to increase. In this scenario, it is paramount that companies implement appropriate retention policies to avoid or mitigate turnover.
Vietnam is expected to continue to maintain robust FDI investment. The country has been attracting FDI in virtually all sectors, making it an all-rounder for investors. Its challenge will be to manage its growth responsibly along with government reforms.
Thankfully, the conditions for Vietnam to emerge as a regional economic force are ripe. With the US-China trade war showing no signs of abating, Vietnam’s free trade agreements, cheap labor, and young working population provide a powerful concoction for it to thrive.
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