Foreign investment appears set to resume as Covid-19 ebbs

Foreign investment appears set to resume as Covid-19 ebbs

Vietnam granted investment certificates for a number of foreign direct investment (FDI) projects in early 2021. This optimistic signal promises good results of FDI attraction throughout the year.

Encouraging results

In the context of shifting flows of global investment flows, Vietnam is emerging as an attractive destination for political and macroeconomic stability, a favorable geographic location and abundant human resources.

Many FDI companies are operating effectively in Vietnam

In the first 13 days of 2021, the southeastern province of Dong Nai attracted more than US$226 million of FDI through 11 projects including three new projects and eight ongoing projects with capital increases. This was the highest result compared with the same periods of the past five years. On January 18, the northeastern province of Bac Giang handed over investment certificates for four FDI projects with total capital of nearly VND13 trillion. One of these projects is Foxconn’s Fukang Technology factory (Foxconn, headquartered in Singapore, is the world’s largest electronic component and computer manufacturer which supplies MacBook, iPhone and iPad products for Apple). The factory will be built on an area of more than 22ha with total registered investment capital of over VND6.23 trillion to manufacture and assemble about eight million iPad and laptop products per year.

According to the Ministry of Planning and Investment, many foreign invested companies in Vietnam are recovering and prepare to expand operations in Vietnam. Not only giants, small and medium foreign investors are also interested in Vietnam. Foxconn Singapore Pte Ltd’s General Director Zhuo Xian Hong recently led a delegation to Thanh Hoa Province to explore opportunities for investment in manufacturing electronic equipment. Foxconn wants to invest US$1.3 billion in a 150ha industrial zone to build manufacturing facilities employing 100,000-150,000 workers to create annual export value of about US$10 billion.

At a late 2020 investment promotion conference with participation of investors from the Republic of Korea (RoK), leaders of Vinh Phuc Province said many large companies have shown an interest in the policy applied by the locality to foreign investment after the announcement of two new major FDI projects.

Preparing to welcome new FDI flows

Dr. Nguyen Van Toan, Vice President of the Vietnam Association of Foreign Invested Enterprises, expects a shift of investment from other countries to Vietnam in 2021 by not only giants but also small and medium investors from developed countries such as Japan, the RoK and the US. FDI flows are expected to resume strong growth when the Covid-19 pandemic is controlled.

To welcome new FDI flows, however, Vietnam needs to prepare in terms of production space and human resources. According to Do Nhat Hoang, Director of the Ministry of Planning and Investment’s Foreign Investment Agency, Vietnam should adopt a new FDI attraction strategy focusing on quality rather than quantity and prioritizing projects that create high added value and apply modern management methods, as well as projects linked to global supply chains as well as domestic businesses.

“Incentive policies with competitive preferences will be applied to attract major projects, strategic investors and multinational groups. Projects using outdated technologies, causing environmental pollution and intensively using natural resources will be refused,” Do Nhat Hoang said.

The amended Investment Law took effect in early 2021, allowing the prime minister to offer special incentives to attract FDI and expanding the range of sectors eligible for investment incentives in order to ensure selective attraction of FDI projects.

VietNam Economic News