Vietnam’s attractiveness in foreign investment cooperation

Besides the stable political and macroeconomic situation, the abundant young labour force, and a golden population structure, Vietnam's investment environment has seen the appearance of many new factors, helping increase its attractiveness to foreign capital flows. These new factors include COVID-19 prevention efforts as recognised by the world, showing a better response to the global crisis than many other countries and the positive growth of the economy.

Production lines of Samsung electronics in Vietnam.
Production lines of Samsung electronics in Vietnam.

Many large corporations are interested in Vietnam

Minister of Planning and Investment Nguyen Chi Dung had an online meeting with General Director of Intel Products Vietnam Kim Huat Ooi in late August. Intel proposed a number of issues related to the implementation of research and development (R&D) activities, technological innovation, the deployment of modern assembly technology, and the enhancement of Intel's capacity in Vietnam to become a state-of-the-art manufacturing plant with the production of their latest products.

At the same time, Intel also provided recommendations regarding corporate income tax and support for the implementation of R&D activities.

Minister Nguyen Chi Dung said that the National Assembly of Vietnam has passed a Law on Investment (amended), which clearly specifies the policies, principles, and conditions for the application of investment incentives and support.

Intel can study and follow the provisions of Vietnamese law to make specific proposals and plans, Dung noted, while the Ministry of Planning and Investment will continue to work with Intel to submit proposals to the Government of Vietnam for consideration and approval.

Since the outbreak of COVID-19 in the world, many investment promotion activities and meetings of multinational corporations interested in Vietnam have been switched to an online form.

In July, more than 1,000 Japanese investors attended the Vietnam - Japan online investment promotion conference to find new investment opportunities in Vietnam in the context that enterprises tend to restructure production and supply chains in order to diversify investment and avoid dependence on a single country or partner.

There are 15 Japanese enterprises supported by the Japanese Government to shift production or expand investment in ASEAN, including investment in Vietnam in the new value chain.
According to the Foreign Investment Agency, total foreign investment into Vietnam reached US$19.54 billion in the first eight months of 2020, equivalent to 86.3% of the same period in 2019 and the disbursement of foreign investment was estimated at US$11.35 billion, equivalent to 94.9% of the same period last year.

Of which, capital contribution and share purchase by foreign investors plunged but newly registered capital and supplemented capital remained in an uptrend with an increase of 6.6% and 22.2% respectively thanks to the attraction of large projects.

The Foreign Investment Agency said that although investment attraction in the eight months of 2020 declined compared to the same period last year, it is still better than many countries in the context of a sharp decline in global investment, demonstrating Vietnam's attractiveness in the eyes of international investors.

Although the pandemic has created a very heavy impact on many economies, Vietnam continued to enjoy a trade surplus over the past eight months with the main contributor being the FDI sector.

Worthy incentives required for enterprises

The COVID-19 pandemic is accelerating the movement of the global supply chain, forming a trend of withdrawing investment capital back to home countries or expanding investment to other countries with competitive advantages in accordance with new development trends.

Prof. Dr. Nguyen Mai, Chairman of Vietnam’s Association of Foreign Invested Enterprises said that along with India and Indonesia, Vietnam is emerging as one of the three best destinations for these capital movement waves.

Previously, Vietnam had the advantage of political stability, macroeconomic stability, and low inflation and it has also begun to be appreciated for its quality human resources. Now Vietnam has two new advantages that help to increase the attractiveness of its investment environment - its abilities in response to the crises caused by the COVID-19 pandemic and the endurance of its enterprises.

However, it is not easy to receive the movement of FDI inflows, because direct competitors of Vietnam including India and Indonesia have promptly devised very specific strategies with outstanding preferential policies in order to attract foreign investment from multinational corporations at all costs.

In this context, Vietnam must have a comprehensive and effective solution regarding land policy, and high quality human resources at affordable costs and others.

Prof. Dr. Nguyen Mai noted that relocated projects will include the transfer of used equipment and production lines thus Vietnam should devise flexible mechanisms to facilitate the transfer of such equipment to Vietnam.

In the future, Vietnam's strategy on foreign investment will give priority to attracting quality and efficient capital flows in accordance with Vietnam's demand for investment cooperation. Accordingly, Vietnam will proactively approach and stand ready to support large corporations and suitable foreign investment projects to promote the effectiveness of business and investment activities.