Many positive signals from US FDI inflows into Vietnam
Date: 12/20/2020 7:55:34 PM

Many US investors survey the investment environment in Vietnam. Areas that US businesses want to invest in focus on renewable energy, agriculture, infrastructure, health, education ...

 In 2019, when the US-China trade war broke out, the wave of production shifting away from China was considered a golden opportunity for Vietnam to attract FDI inflows from the US and developed economies.

However, according to data from the Foreign Investment Department (Ministry of Planning and Investment), in the first 9 months of 2020, the US invested in Vietnam ranked 12th, with a total capital of 222 million USD. Cumulatively, the total US FDI into Vietnam is about 10 billion USD. This capital source is not considered commensurate with the commercial relationship between the two sides between Vietnam and the US. 

Vietnam is not the only destination for the transition. Compared to other countries such as India, Indonesia, and Malaysia, Vietnam’s advantage is less. Therefore, to attract quality capital flows from the US, Vietnam still has a lot to do if it does not want to miss a great opportunity. 

For coffee at the end of this week, VnEconomy had an interview with Mr. Nguyen Van Toan, Vice President of Vietnam Association of Foreign Investment Enterprises (Vafie) about attracting US investment into Vietnam. In particular, in the context of the US election waiting for the end of the day, will new US decrees in the next period under the new President term have an impact on FDI inflows into Vietnam?

                 MANY POSITIVE SIGNALS FROM US FDI  INTO  VIETNAM  ARRIVED

American investors have paid more attention to the Vietnamese market, but seem to be still concerned about not investing much compared to the US capital inflow every year. How do you view the FDI relationship between Vietnam and the US?

In the previous years, the ranking of countries investing in Vietnam, the US stood still at number 10 -11, but in 2019 it dropped to 12th rank, not commensurate with the trade relationship between Vietnam and the US.

However, it should be noted that the US invests in countries including Vietnam through many different channels such as British Virgin Islands, Panama, Hong Kong, these are all tax havens. Although there are no official statistics, according to international experts, the source of that investment abroad is also quite large. Thus, in fact, the total investment capital from the US to Vietnam may be greater than 10 billion USD, both directly and indirectly, through a third country.

Since 2019, when the US-China trade war broke out, a wave of production shifting away from China appeared. In that wave, is Vietnam really benefiting as we always expected?

FDI inflows into Vietnam in recent months slowed down due to the general downtrend of global capital flows. Along with the impact of the Covid 19 epidemic, it is a very good endeavor to keep the capital input equivalent to those in the previous years. The production shifting trend will have a certain delay, it cannot be calculated by month, but may have to be calculated by year. 

Trump’s policies are considered to be introverted, bringing businesses back to restore the US market, create jobs and develop the economy. So is the capital flow likely to return to the US more than to other countries, including Vietnam? 

During the four years of running the country, Mr. Trump’s policies have literally turned the pivot, the trend of protectionism in the country, but the point is still to make the US stronger. For example, shortly after taking office, Mr. Trump signed an order to withdraw from the Trans-Pacific Partnership (TPP), or after some time, after the turmoil not resolved, the US also withdrew from the Health Organization. World WHO.

Mr. Trump’s introversion policy aims to solve the problem of labor and employment, and preserve the value of the United States in terms of technology. On the other hand, due to the impact of the Covid epidemic, Mr. Trump urged businesses to return to the US more urgently. The positive point is that many Americans, especially the business class, and the middle class support but reduce the flow of US investment abroad. 

Previously, the disbursement of FDI abroad of the US reached 300 billion, but in recent years like 2019, there has been a sharp decline. In Vietnam, previously the US invested in Vietnam higher than China, but recently China has surpassed, investing in Vietnam is strong. Especially in 2019, Chinese investment in Vietnam ranks 4-5th, which is unprecedented. 

However, there are many positive signals from the inflow of investment capital from the US into Vietnam. According to the information I have, the Ministry of Planning and Investment has contacted many large corporations, including corporations starting to invest outside and corporations wanting to relocate to a third country. They are investigating the investment climate in Vietnam. Areas that US businesses want to invest in focus on renewable energy, agriculture, infrastructure, health, education ... 

American projects are very valuable, several billion dollars. If these projects become a reality, it will create a turning point in attracting large, high-quality capital flows into Vietnam. 

No country can develop if it only relies on foreign investment because they support only a certain stage. It is very difficult to rely on foreign investment without self-development, self-reliance, and forever following them.
MR. NGUYEN VAN TOAN - VICE CHAIRMAN OF VAFIE

What about Mr. Biden? If in the case of a fall in the US election, what impact does the FDI inflow into Vietnam, not only from the US but also from other third countries having relations with the US?

The common ground between Mr. Trump and Mr. Biden wants the US to lead the world. However, Mr. Biden’s trade and foreign policy is likely to be softer and more moderate. Wanting to lead the world, Mr. Biden’s point of view is not going alone but gathering forces with allies to increase strength.

The US role with international organizations is likely to change. According to international experts, it is likely that the US will return to WHO, return to the TPP Agreement, which is now the CPTPP, even though it must be carefully considered. When the US returns to TPP, Vietnam will have an advantage over exporting goods to the US. In the TPP agreement, there will be more favorable conditions than investment incentives. This will also boost FDI inflows from the US to other TPP countries, including Vietnam.

In addition, when the Vietnam - EU Investment Protection Agreement (EVIPA) comes into effect, foreign investment from the EU into Vietnam is more prosperous. The better Vietnam’s investment environment is, the US investors will also pay more attention to Vietnam. 

COOPERATION BY WIN - WIN

However, to welcome the wave of FDI capital shifting from the US to countries outside China not only Vietnam but also other countries such as India, Indonesia, Malaysia ...? How can you compete with these countries? 

India is more attractive to American investors than it is because of its larger economic size, large population, better human resource level than Vietnam, and good engineer training system.

There are three important things in the decision of US investors to invest in Vietnam: First, intellectual property rights; Transparency; The regular change of the legal system on investment policies also makes them afraid. American investors entering Vietnam often require a stricter investment environment, similar to the point of view of investment from countries in the European Union (EU).

Currently, the Ministry of Planning and Investment has launched many programs to attract large corporations such as willing to listen to their requests for mechanisms and policies.

Of course, the appropriate "tailoring" method must still be applied. That means I give you preferential tax, mechanism, in return you must have an impact, spread to domestic enterprises on technology transfer ...

That is, even investors from the US cannot attract at all costs, the most important is win - win cooperation?

Yes. When we bring a large corporation into Vietnam, we have to plan a longer, more specific way, to calculate if I give you the highest incentives in Vietnam, along with how your impact will spread. How do Vietnamese businesses join their value chain? Reputation leaves Vietnam with nothing to attract such businesses, not just a simple salary.

It seems that joining the value chain will be very difficult because after many years of large investors from Korea to Vietnam, their supporting enterprises are still small, the level of participation is not much?

Four years ago, I attended a Samsung seminar on inviting Vietnamese supporting enterprises to their system, but there was no business meeting the demand. Their criteria are high, but their level is still low, with outdated technology. But now there has been better progress. Vietnamese businesses are already 1-2-3 suppliers to Samsung. 

So in the coming time, what specific strategy do you think should have from the Government and Vietnamese businesses to make Vietnam’s supporting industry better, to attract American businesses to pay more attention to Vietnam? 

First, there must be policies to support domestic enterprises so that they have capital and technology. The quality, the corresponding price or must be cheaper, with better and more stable supply time, it will join the value chain of foreign investors including the US, South Korea, Japan ... 

 We have a lot of "make in Vietnam" products, but mainly from foreign countries that do it all. If so, then we will never get rid of dependence or get rid of weak average income. We must grow stronger by building a stronger industrial brand of our own.
MR. NGUYEN VAN TOAN - VICE CHAIRMAN OF VAFIE

Along with that, the state has a supporting policy for large enterprises as the "leading crane" to lead and support small businesses. For example, Vingroup, which buys car manufacturing technology, has a certain foothold in the market. At that time, Vingroup can completely create supporting businesses, supporting small businesses to participate in their value chain. In the past, when it comes to supporting, we always think of supporting foreign invested enterprises, why don’t we think it is supporting large economic groups in Vietnam to develop together? 

Recently, we have the Law to support small and medium enterprises, but we also propose to large enterprises, there must be a law governing their operations, there is a legal corridor for them to support small businesses.  

CAPITAL ATTRACTING NEEDS ONLY ENOUGH  ENERGY WITH LOW  CAPACITY

Have you ever worked with American investors, what do they expect about the investment environment in Vietnam?

They want Vietnam to have a more stable, transparent law and intellectual property rights. They care a lot about these US issues. It is difficult for American companies to account for unofficial fees. According to a VCCI survey, unofficial costs have decreased recently but still remain. 

To introduce FDI enterprises from the US, what advantages do Vietnam have the most outstanding advantages compared to other countries?

Vietnam has the advantage of cheap high-tech human resources, high-quality engineers receive 20-30 million salary while other countries pay much more. Vietnam’s geographical position is also considered as favorable when exporting goods to other regions, and as ASEAN’s gateway to Europe. Political economy is stable, security is guaranteed. 

Most importantly, Vietnam integrates deeply and widely, the Vietnamese economy joins the FTAs ​​with high openness. When US investors enter Vietnam, they can enjoy tariffs when exporting to countries where Vietnam has an FTA.         

It is possible to expect a wave of FDI from the US to enter Vietnam in the coming time, will US investors rise to number 1 investing in Vietnam?

Very difficult. If you can do that, that’s fine. Because it’s good for many things, for socio-economic issues.

But in fact, FDI inflows are too large but not absorbed is not necessarily good. Should only attract a moderate amount of FDI compared to their absorption capacity, how best Vietnamese enterprises participate in the value chain of large corporations.  

(Source: VNEconomy)  
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