Enhancing FDI attraction through order shifting trend

Monday, 2020-07-06 17:15:10
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Samsung Group's factory in Thai Nguyen Province (Photo: baodautu.vn)
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NDO – Positive signs in foreign direct investment (FDI) began to appear in June, reflecting the increase in the amount of new FDI capital and the gradual improvement of capital disbursement.

In the first six months of this year, the country attracted a number of major projects, pushing the average size of each FDI project from US$4.3 million in 2019 to nearly US$6 million in the first half of 2020.

However, there is no clear evidence of global FDI shifting from China to new investment destinations, including Vietnam. It takes 2-3 years to move a factory from one place to another following the careful consideration of all opportunities. Moreover, in the context of global investment activities having been almost paralysed due to Covid-19, the investment promotion activities of multinational corporations have also been interrupted, so investment decisions are very difficult to implement at this time. In addition, host countries have also made policies to keep existing foreign investors as well as increase tax and land incentives and reduce costs and procedures to attract new investors; therefore, Vietnam has to face many competitions. The country should have a proactive and appropriate investment attraction strategy to attract “some new eggs” in line with the principle of “not putting all your eggs in one basket”.

There are now three trends of global FDI inflow shifting: factory shifting, the transfer of parent company's capital and order shifting. According to economic experts, the movement of factories is very difficult, because companies around the world are struggling due to the pandemic. Therefore, an immediate opportunity that Vietnam can seize is the shifting of orders from the corporations which are operating their production in Vietnam. This trend can happen soon and rapidly, so Vietnamese enterprises should prepare all relevant conditions to receive and gradually master the technology needed.

Opportunities always come with challenges. In the long term, Vietnam should promote oriented investment to important investors. The attraction of FDI capital at the expected levels in terms of both quantity and quality depends largely on the preparedness of Vietnam. In particular, the most important solution is to improve the capacity of departments and agencies in the localities as well as management boards in order to give advice on how to select investors and projects in line with the new orientation contained in Politburo’s Resolutin No.50-NQ/TW on orientations to perfect institutions and policies and to improve the quality and effectiveness of foreign investment cooperation towards 2030.

It is also crucial to review conditions related to land, infrastructure and human resources to be ready to receive shifted investment capital flows. Vietnam should focus on multinational, hi-tech and environmentally friendly corporations.