As several foreign investors are eyeing Viet Nam for opportunities, the country must make greater efforts to improve the investment climate.
Many enterprises from countries such as the UK, the Republic of Korea and Japan said Viet Nam is an attractive investment destination, given the country’s stable macro-economy, rapid growth and large market with a rising middle class.
Foxconn, Apple’s biggest contractor, was reported to sign a lease to occupy a new site in Bac Giang Province in a deal worth around US$62.5 million to expand production capacity, part of the effort to shift production away from China. This was evidence that Viet Nam was becoming an attractive destination for FDI in the global production shift.
The European Chamber of Commerce in Vietnam (Eurocham)’s 2022-2023 Whitebook, which was launched late last week, pointed out that Viet Nam was an attractive FDI destination thanks to the country’s stable macro-economic environment and controlled inflation, which consolidated investors confidence in the trade and investment environment.
The low cost of doing business, strong economic growth, rising middle class and a favourable business environment have made Viet Nam an attractive destination for foreign investment, EuroCham said.
Jens Ruebbert, vice chairman of the EU-ASEAN Business Council, said while leading an EU delegation to visit Viet Nam recently that Viet Nam is playing an even more important role with the EU in terms of trade and investment, especially in the context of the current volatile world.
He said that many EU companies were interested in the Vietnamese market and considered it very important.
A survey by the Japan External Trade Organisation (JETRO) published recently showed that about 60 per cent of Japanese firms planned to expand their operations in Viet Nam, the highest rate in Southeast Asia.
Nakajima Takeo, chief representative of JETRO Hanoi, said that Viet Nam was becoming an indispensable part of the global supply chains of Japanese enterprises.
Japanese companies and those from Singapore, the Republic of Korea, and Taiwan (China) were also eyeing the Vietnamese market.
During Prime Minister Pham Minh Chinh’s recent visits to Singapore and Brunei, investment funds and investors from the two countries confirmed their interest in investing in Viet Nam.
At the Viet Nam - Singapore Business Forum taking place during Chinh’s visit to Singapore, Patrick Lee, chair of the Board of Members of Standard Chartered Bank Vietnam (Limited), said that Viet Nam is a rising star in the region.
Viet Nam’s attractive investment policies and favourable demographics made it the market of choice for many Singaporean investors and businesses. With Viet Nam’s burgeoning consumer market and opportunities from green energy to infrastructure development, Standard Chartered saw greater interest among Singaporean clients to expand into Viet Nam, he said.
At a recent conference on promoting the Government’s action plan to implement the 13th-tenure Politburo’s Resolution No.30-NQ/TW on orientations for socio-economic development and safeguarding defence and security in the Red River Delta to 2030 and vision to 2045, nearly $10 billion were committed for the region in the coming time.
In the region, Ha Noi, Bac Ninh, Vinh Phuc, Quang Ninh, Thai Binh, and Hai Phong were all 'magnets' attracting investment in recent years. This was the second largest FDI attraction in the country, accounting for 31.4 per cent of the total FDI that Viet Nam had attracted in the past 35 years.
Major global groups, such as Samsung, LG, Honda, Canon, Foxconn, and Toyota, have chosen localities in the region and made them their production bases.
Things to improve
There were several things which Viet Nam needed to improve to attract FDI.
According to JETRO, Japanese enterprises are still hesitant about some risks of the Vietnamese business environment related to the transparency of administrative procedures, tax system, tax procedures, legal system, visa procedures and work permits.
In addition, increasing labour costs also factor into attracting FDI.
Viet Nam could attract more FDI by reducing administrative obstacles, improving infrastructure, improving human resource capacity and reducing visa barriers for foreign experts, EuroCham said.
Adopting a global minimum tax rate of 15 per cent by 2024 put the global competition to attract FDI into a new phase.
As a capital importer applying tax incentives quite widely, Viet Nam faced many big questions. The biggest is how to maintain the advantage of attracting FDI and direct the flow into industries and fields that the economy needs.
Phan Duc Hieu, a member of the National Assembly's Economic Committee, said that when tax incentives were no longer a dominant and attractive tool, the alternative solutions were nothing but a favourable business environment where investment was more efficient, the burden of complying with laws was reduced and procedures were more transparent and faster.
“The Vietnamese economy is still in the process of reform. This is an opportunity for Viet Nam to implement the economic restructuring plans more efficiently,” Hieu said.
Dau Anh Tuan, deputy general secretary of the Viet Nam Chamber of Commerce and Industry, said that FDI companies were expecting improvements in the quality of human resources, land fees, infrastructure quality, logistics costs and quality together with policies on science and technology.
Those were prioritised in reform plans, but the room to create breakthroughs was not much, Tuan said. It’s time Viet Nam prepared for the global minimum tax, he stressed. — VNS