Vietnam Excels in FDI Race

In 2020, Vietnam has become a bright spot in attracting the shift of FDI inflows, for the first time, our country has entered the top 20 leading countries in FDI attraction in the world.
November 16, 2021 | 08:07
Vietnam Excels in FDI Race
Prof. Nguyen Bich Lam: Foreign investors are placing great trust in Vietnam's link in the global supply chain. Photo: VGP

Covid-19 pandemic and FDI 'filter'

Foreign direct investment (FDI) plays an important role for all countries in the world. For developing countries, FDI inflows are especially important for growth and international economic integration, because this is an external force that adds capital, technology, the ability to organize and participate in the global supply chain.

However, the Covid-19 pandemic has caused profound economic, social and political consequences on a global scale. Strategic competition between major countries is fierce, taking place in many fields, especially in science, technology, and security. Therefore, these countries have implemented many solutions to strengthen control and strict appraisal of foreign investment projects, especially merger and acquisition projects.

8 groups of advantages of Vietnam in attracting FDI

With the Government's efforts in institutional reform, improving the business investment environment, according to the international community's assessment, Vietnam has 8 groups of advantages in attracting foreign investment. These groups include: Stable macro environment, dynamic economy, expanding consumption market with abundant supply.

The political situation in Vietnam is stable, ensuring consistency in economic development policies and attracting foreign investment.

Besides, the adequate legal environment is one of the important factors attracting investors - this is appreciated by international friends.

Vietnam has an open foreign investment policy. Typically, the Investment Law 2020 and the Enterprise Law 2020, effective from January 1, 2021, continue to demonstrate this policy by cutting a number of administrative procedures on investment.

The business environment is constantly improving, many indicators of Vietnam's business environment and competitiveness have been improved.

In particular, in recent years, Vietnam has been a member of many important multilateral and bilateral trade agreements. This is an important factor in enhancing the position and attractiveness of Vietnam in the business strategy of foreign investors.

Vietnam's labor force is young and abundant, with more than three-quarters of the population aged 15 and over participating in the labor force. In 2020, the rate of trained workers receiving certificates reached 23.6%. Besides, the Vietnamese workforce is appreciated for hard work, high education level, ease of training and low labor costs. This is one of the competitive advantages of Vietnam compared to other regional labor markets.

The geographical position of Vietnam is especially favorable with a long coastline, many deep-water ports, and is a gateway for international trade in goods by sea. Moreover, the increasingly synchronous infrastructure and technology is also an advantage attracting foreign investors to Vietnam.

Vietnam Excels in FDI Race
Vietnam has many advantages in the race to attract FDI. Photo: VGP

Foreign investors are placing great trust in Vietnam

According to UNCTAD's report, in 2020, with a total capital of US$16 billion, Vietnam has become a bright spot in attracting FDI inflows, for the first time, our country entered the top 20 leading countries in the world in attracting FDI. Vietnam holds the leading position in the race to win FDI with potential rivals such as China, Indonesia, India and Mexico.

Despite being in the Covid-19 pandemic, in the 10 months of 2021, foreign investment capital poured into Vietnam reached US$23.74 billion in 18 fields. The 10-month economic picture shows that the manufacturing and processing industry for export is the main driving force, this is also the leading field in attracting foreign investment. This shows that foreign investors are placing great trust in Vietnam's link in the global supply chain.

What needs to be done to continue leading in the race for FDI?

The Government and relevant ministries, branches and localities need to implement a number of solutions to promote foreign investment attraction in the coming time:

One solution is to review and adjust foreign investment policies in a timely manner to suit and keep up with fluctuations and uncertainties of the global economy, changes in FDI attraction strategies of countries around the world.

Second, the Government needs to specify a list of industries and fields that need to attract foreign investment, and sectors that can only be implemented by domestic investors. Especially, Vietnam needs to develop regulations and standards as a new filter to select foreign investors with advanced, capable to maintain and ensure the national security of the country.

Next, Vietnam needs to continue to consolidate a strong and stable foundation; have the right strategy in handling the Covid-19. At the same time, the Government has to speed up the vaccination process to bring economic and social activities back to normal, eliminate disruptions in the supply chain of goods and labor, creating confidence for foreign investors.

The Government assigned relevant ministries and branches to evaluate the advantages and disadvantages of 8 groups of advantages attracting FDI in Vietnam. Then, they promote the strengths and overcome shortcomings, so that these 8 groups of advantages can be more effective in attracting FDI in the coming time. Especially, the Ministry of Industry and Trade needs to assess the advantages, disadvantages and existence of each trade agreement that Vietnam is participating in. From there, the Ministry will have solutions to effectively promote the agreements and support of the international community.

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Rosie Nguyen
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