HANOI, 22 Feb – As several foreign investors are eyeing Vietnam for opportunities, the country must make greater efforts to improve the investment climate.
Many enterprises from countries such as the United Kingdom, South Korea and Japan say Vietnam 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$62.5mil (RM277mil) to expand production capacity, part of the effort to shift production away from China.
This was evidence that Vietnam was becoming an attractive destination for foreign direct investments (FDIs) in the global production shift.
The European Chamber of Commerce in Vietnam’s (EuroCham) 2022-2023 Whitebook, which was launched late last week, pointed out that Vietnam 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 Vietnam an attractive destination for foreign investment, EuroCham said.
Jens Ruebbert, vice-chairman of the European Union (EU)-Asean Business Council, said while leading an EU delegation to visit Vietnam recently that Vietnam 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.
Besides, a survey by the Japan External Trade Organisation (Jetro) published recently showed that about 60% of Japanese firms planned to expand their operations in Vietnam, the highest rate in South-East Asia.
Nakajima Takeo, chief representative of Jetro Hanoi, said that Vietnam was becoming an indispensable part of the global supply chains of Japanese enterprises.
Japanese companies and those from Singapore, South 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 Vietnam.
At the Vietnam – Singapore Business Forum taking place during Chinh’s visit to Singapore, Patrick Lee, chair of the board of members of Standard Chartered Bank Vietnam Ltd said that Vietnam is a rising star in the region.
Vietnam’s attractive investment policies and favourable demographics made it the market of choice for many Singaporean investors and businesses.
With Vietnam’s burgeoning consumer market and opportunities from green energy to infrastructure development, Standard Chartered saw greater interest among Singaporean clients to expand into Vietnam, he said.
At a recent conference on promoting the government’s action plan to implement socio-economic development and safeguarding defence and security in the Red River Delta to 2030 and vision to 2045, nearly US$10bil (RM44bil) were committed for the region in the coming time.
In the region, Hanoi, 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% of the total FDIs that Vietnam 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.
There were several things which Vietnam needed to improve to attract FDIs.
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 FDIs.
Vietnam could attract more FDIs 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% by 2024 puts the global competition to attract FDI into a new phase.
As a capital importer applying tax incentives quite widely, Vietnam faced many big questions.
The biggest is how to maintain the advantage of attracting FDIs 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 Vietnam to implement the economic restructuring plans more efficiently,” Hieu said.
Dau Anh Tuan, deputy general secretary of the Vietnam 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 Vietnam prepared for the global minimum tax, he stressed.
