Expecting a new wave of investment from FDI

Closing 2015, Vietnam was assessed to have had a great year in attracting foreign direct investment (FDI), reaching 22.76 billion USD, an increase of 12.5% ​​compared to the previous year. Entering 2016, analysts said that Vietnam's opportunities to attract this capital source are more favorable and there may be a new wave of investment, thanks to the deep integration policies that have been and will soon take effect.

Photo SGGP Online

Positive signal

According to a recent report by the Foreign Investment Agency (FIA) under the Ministry of Planning and Investment, in the first month of 2016, committed FDI capital reached 1.334 billion USD through 127 newly licensed projects and 56 projects with increased capital, more than doubling the capital compared to the same period last year. The realized capital of FDI enterprises in the past month is estimated at 800 million USD, an increase of 23.1% compared to the same period last year. The above results are considered a favorable start, predicting another successful year for Vietnam to attract larger and higher quality FDI capital.

Attracting FDI capital has had a great year (Photo: Semiconductor component production at a Japanese enterprise in Tan Thuan Export Processing Zone, Ho Chi Minh City). Photo: Cao Thang

Meanwhile, in the eyes of some investors and economic experts, analyzing the advantages of Vietnam in attracting FDI capital for this year and the coming years on the basis of a series of free trade agreements (FTAs) between Vietnam and other countries that have been signed and are about to take effect, especially on February 4, the Trans-Pacific Partnership Agreement (TPP) was signed, which will open up opportunities for Vietnam to attract foreign investment capital in general, including FDI capital, indirect investment (FII) and other foreign investment sources. Trade relations between Vietnam and TPP member countries will develop strongly in the future, thereby attracting investment capital into Vietnam from countries in the TPP bloc. Investors outside the TPP bloc will also invest in Vietnam to benefit from tariff incentives. In particular, investment from Japan and the US is expected to increase sharply, because these two countries have many advantages in technology and engineering that Vietnam wants to attract.

Analysts believe that Vietnam has a favorable opportunity to become a strategic investment destination for multinational corporations. However, Asia will still be the main source of capital even though capital from the US and Europe has increased. Mr. Nguyen Noi, Deputy Director of the Foreign Investment Department, also said that the situation shows that Korea and Japan continue to be the two countries with the most committed FDI capital to Vietnam in the next 2-3 years.

At the dialogue between Korean enterprises and state agencies (Business Dialogue 2015 in Vietnam) in Ho Chi Minh City last December, Mr. Park Noh Wan, Consul General of Korea in Ho Chi Minh City, said that among ASEAN countries, Vietnam is the country that receives the most investment capital from Korea. Many large corporations from the kimchi country such as Samsung, LG, Lotte, E-Mart, Doosan, CJ, Kumho are all present. Previously, Korean enterprises focused on investing in labor-intensive industries such as textiles, footwear, etc., but now they have expanded to key industries such as electricity, electronics, information technology, contributing greatly to the development of Vietnam's industry. In the near future, FDI capital from Korea will continue to increase in the fields of electronics, logistics services, retail, etc.

Great contribution but also many worries

Last year, the FDI sector contributed 207.85 billion USD to Vietnam's total import-export turnover, up 16.7% compared to 2014. Of which, exports reached 110.59 billion USD - up 17.7%, accounting for nearly 68% of the country's total export turnover, contributing to reducing a large amount of foreign currency deficit of the domestic enterprise sector. In addition, the contribution of the FDI enterprise sector in recent years has changed the structure of Vietnam's export products, which were mainly from products that use a lot of manual labor such as textiles, footwear, raw agricultural products... to products that require higher technology and techniques. For example, the telephone product, from a country without this industry 10 years ago, when Samsung, LG, Microsoft... invested in production, Vietnam is now leading in exporting this product. Last year alone, the total export value of all kinds of phones and phone components reached 30.18 billion USD (up 27.9% compared to 2014). Or another group of technology products with very high export turnover last year was electronic products, computers and components. Although ranked third in export value, this group had the highest growth rate in turnover in 2015, reaching 15.61 billion USD (up 36.5% compared to the previous year).

Vietnam's advantages in attracting FDI are clear, in addition to low costs and potential market size, it is also an economy deeply integrated into the global economy. But observers and businesses also have many other concerns. That is, FTA and TPP on the one hand bring FDI capital into Vietnam and help the supporting industry develop, but it also becomes the biggest competitor, making it difficult for domestic companies without large scale and modern technology to survive. The opportunity to attract FDI after TPP is huge, but it also poses a challenge that there will be many projects with low technical and technological content, easily causing environmental pollution in different fields such as textile dyeing, garment, leather and footwear... from countries with which Vietnam is having a trade deficit, so it is necessary to know how to eliminate the above projects.

Obviously, integration brings many benefits as well as challenges. Therefore, localities need to take advantage of this opportunity to exercise the “right to choose” projects, in order to improve the quality and efficiency of attracting FDI capital flows.

According to SGGP Online