The US-China trade war and the COVID-19 pandemic have provided Vietnam with an opportunity to attract foreign investment (FDI) as global capital flows tend to shift to safe havens. This is also a time when our country needs to drastically change our thoughts and actions in the selection of FDI partners and projects to move more towards high-quality capital flows as directed in Politburo Resolution No. 50. These factors make FDI attraction become a focal point of the "COVID year" in 2020 and will continue to do so in the years to come.
Vietnam is open to investors
At a seminar held between Vietnam’s chief representatives abroad for the 2020-2023 term and the Committee for the Management of State Capital at Enterprises, Deputy Minister of Foreign Affairs Bui Thanh Son said that Vietnam is now a bright spot in investment attraction and more than 126 large corporations shifting their investments are now looking to invest in Vietnam.
Meanwhile, Director of the Foreign Investment Agency under the Ministry of Planning and Investment Do Nhat Hoang revealed that although investment activities were interrupted due to the impact of the pandemic, the Ministry of Planning and Investment (MPI) and senior leaders of large corporations around the world still maintained discussions about investment cooperation opportunities through many channels. In particular, a number of online seminars were held at the operation centre of the MPI to connect with destinations across the world so that large corporations can find out more investment information regarding Vietnam. Through this activity, many large corporations started negotiations to bring investment projects into Vietnam with registered capital of billions of US dollars.
According to the United Nations Conference on Trade and Development (UNCTAD) global investment in 2020 declined by 40%, but FDI inflows into Vietnam saw a much lower rate than other countries in the world and the region, especially in disbursed capital. Export and import turnover of FDI enterprises also decreased slightly compared to the same period in 2019.
“Despite the many difficulties that arose due to the COVID-19 pandemic, FDI enterprises have still maintained relatively good production and business activity levels. This is a positive signal, demonstrating the confidence of foreign investors in the investment environment in Vietnam and also proving that Vietnam is still seeking further FDI,” Hoang emphasised.
In 2020, not only manufacturers, but also supply companies shifted investment to Vietnam, as well as providers of logistics and warehouses services and others doing likewise. Big manufacturers are considered "queen bees" coming to Vietnam to build a hive, bringing along "worker bees" - suppliers and supporting manufacturers, and creating a new ecosystem and supply chain in Vietnam.
This trend is happening in the electronics industry, as the story of Samsung has shown and is now also evident in the story of animal feed, e-commerce, consumption, and auto parts industries.
Acting fast to seize opportunities
Dr Nguyen Dinh Cung, a member of the Economic Advisory Group to the Prime Minister, expressed his concerns about FDI attraction in Vietnam. According to the expert, opportunities for Vietnam in terms of the shifting of global investment capital flows is great, but the "eagle" itself will not come if we take no action.
“I have just had the opportunity to work in Quang Ninh and Hai Phong, a region with a lot of potential in terms of its land and synchronous infrastructure, thanks to its seaport system and airport linked with Hung Yen ,creating a large industrial park capable of attracting the world's leading technology enterprises. If there is a policy of regional linkage, these localities can create further intrinsic attractiveness to lure "eagles" to turn Vietnam into an important global production location. If these localities still compete in the attraction of FDI as before, they will only scatter and reduce Vietnam's attraction in the eyes of foreign investors,” Cung said.
To seize the opportunity, it is advisable to take quick action and change the methods of attracting investment. First of all, the concept of "high quality investment" must be clearly defined to set screening criteria and formulate suitable policies for each industry and region in order to actively attract investors. To do this, it is necessary to have a new approach tailored to specific projects and investors, not applying a general policy to all projects.
Meanwhile, investors pouring capital into Vietnam can enjoy outstanding incentives but must also meet set conditions and be a reputable and socially responsible investor.
Referring to the concept of "preparing the nest to welcome the eagles", used recently to regarding the attraction of high-quality FDI in Vietnam, Prof. Nguyen Mai, President of the Vietnam Association of Foreign Invested Enterprises (VAFIE) said that there were “eagles” but so far only Asian and a few European or American eagles. This is the time for Vietnam to proactively direct the flow of FDI and prepare conditions to attract high-tech and pervasive projects to meet the needs of the country’s new development period.
In the context of a decline in global investment activities due to the impact of the COVID-19 pandemic, although Vietnam has many advantages and has emerged as a bright spot in investment attraction, FDI inflows have not yet strongly recovered. This is the time for Vietnam to improve its investment and business environment to stand ready to welcome big waves of FDI.
