Foreign direct investment (FDI) enterprises want a favorable and stable investment environment when investing in Vietnam, and for domestic enterprises to increasingly improve their capacity to meet the requirements of FDI enterprises.
What are the expectations of FDI businesses when investing in Vietnam?
To date, Vietnam has attracted more than 26,500 FDI projects, with a total registered capital of US$334 billion and a total implemented capital of approximately US$184 billion. In 2018 alone, over US$25 billion came from FDI enterprises (at the conference summarizing the past 30 years of FDI attraction in Vietnam, approximately US$11 billion was announced).
Evaluating policies to attract foreign direct investment (FDI) into Vietnam, Mr. Bruno Angelet, Head of the European Union Delegation in Vietnam, shared: After 30 years of rapid economic growth, Vietnam needs "higher quality" capital that brings more value to the country. Currently, incentives for FDI enterprises investing in Vietnam mainly consist of reduced tariffs, preferential interest rates, and import tax exemptions. However, attracting high-tech FDI requires more complex tools and investment strategies. Vietnam needs to improve investment and business practices while continuing to remove investment barriers.
"Transparency" – The most important and essential element.
"Helping investors better understand the regulations and procedures they need to comply with is crucial. A fair, transparent, stable, and predictable business environment is a top priority for EU investors," said Bruno Angelet.
Summary after 30 years
At the conference summarizing 30 years of attracting FDI, the investment environment of Vietnam was highly appreciated, and it was emphasized that the country has good opportunities to attract large foreign investors in the near future.
According to Michael Kelly, President of the American Chamber of Commerce in Vietnam, fairness and objectivity are crucial for the investment and business environment, and the provisions in the Investment Law need to be clear to protect the rights of investors.
Mr. Ryu Hang Ha, President of the Korean Chamber of Commerce in Vietnam (Korcham), representing Korean FDI enterprises, emphasized that Vietnam needs to enhance the competitiveness of its investment and business environment in the new context by boosting infrastructure investment to ensure a skilled workforce in science and technology and to achieve high-quality operations. He stressed that tax incentives alone are insufficient; what he and other FDI enterprises expect when investing in Vietnam is a comprehensive, friendly government policy, with taxes being only a small part of it. Furthermore, administrative procedures need to be handled clearly, quickly, and transparently, with reliability being a top priority for investors like himself. He added that when enacting laws, clear and specific preparation is necessary to avoid disputes. Businesses hope that these preferential policies remain stable to avoid anxiety and worry, and they expect relevant authorities to adhere to the commitments made at the national level.
Domestic businesses need to improve their capabilities.
Mr. Tomaso Andreatta, Co-Chairman of the Vietnam Business Forum (VBF), stated that many FDI enterprises are currently seeking to expand their business in Vietnam. Therefore, the Vietnamese government needs to create a more attractive investment environment by improving the business investment environment, balancing and opening up the market. Mr. Andreatta said that FDI enterprises need the Vietnamese market, but they also need good production conditions. If technology and infrastructure are not up to standard in the energy and transportation sectors, Vietnam will find it difficult to attract new FDI. Furthermore, FDI enterprises need to help improve the skills of workers so they can master and operate automated equipment.
The ability of domestic enterprises to meet the stringent requirements of FDI enterprises in supplying components and parts is also a frequently discussed issue recently. On the one hand, many argue that FDI enterprises have not truly strengthened their connections with domestic enterprises to support their deeper participation in the value chain. On the other hand, from the perspective of FDI enterprises, the capacity and expertise of many domestic enterprises are crucial for promoting this connection.
VBF Business Forum 2018
Mr. T. Andreatta also stated that a series of free trade agreements signed by Vietnam require a high percentage of local resource contributions, and that local production needs deeper involvement in the supply chain, not just simple assembly. Therefore, local businesses need to have sufficient capacity or improve their capacity, which will please FDI businesses because production will be boosted much more easily and quickly. “But if we cannot purchase raw materials locally due to quality issues, lack of reliability, or contract breaches by local businesses, that would be a serious problem,” Mr. Tomaso Andreatta said.
Mr. Tomaso Andreatta also shared his thoughts on the inherent limitations in the legal system, especially regulations related to high technology and intellectual property. He emphasized that FDI enterprises investing in Vietnam are hesitant to transfer intellectual property for fear that it will not be protected, making the investment very risky. Therefore, "we urgently need a mechanism to protect our intellectual property so that we can bring the best talents here to share the best production methods. That is why, to date, Vietnam has done very well in continuously attracting investment capital, but still lacks the most advanced technologies."
Enhancing the quality of domestic human resources.
Many opinions have been expressed on this issue, but in general, domestic businesses need to improve their skills and resources. In addition, the government should encourage businesses, especially large ones, to shift to high-tech and modern industries to gradually meet the expectations of FDI businesses investing in our country in the new industrial era, the era of Industry 4.0. www.expertis.vn
Orientation for attracting FDI in the period 2018 – 2030
Foreign direct investment (FDI) continues to flow strongly into Vietnam.
