Vietnam faces tough competition in FDI attraction

13:00 | 28/09/2020 Economy

(VEN) - Vietnam is facing tough competition from other countries to attract foreign direct investment (FDI), requiring improvements in infrastructure, clean lands and a skilled labor force.

vietnam faces tough competition in fdi attraction

Due to the outbreak of the Covid-19 pandemic, supply chains around the world are facing major disruptions. Many large economies realize that it is necessary to improve supply chains and reduce dependence on manufacturing in China. Many companies are accelerating their efforts to relocate production out of China. Facing a shift in investment from China to other countries, Thailand, Indonesia, India and Bangladesh are quickly adjusting their FDI policies to grasp the opportunity.

Professor Nguyen Mai, chairman of the Vietnam Association of Foreign Invested Enterprises (VAFIE), said Vietnam is not the only country in Asia eyeing capital outflows from China. India and Indonesia are emerging as alternatives, too. The Indian government has contacted more than 1,000 American and other companies to offer incentives for manufacturers seeking to move out of China. India has prepared a clean land fund and infrastructure to welcome investors, while studying tax exemptions and other incentives for investment projects in priority areas. Indonesia has lowered tax rates in a bid to attract more investment and committed to improving its business and investment environment.

Despite the competition pressure, Vietnam remains attractive to foreign investors. According to the Ministry of Planning and Investment’s Foreign Investment Agency, newly registered and adjusted capital increased by 6.6 percent and 22.2 percent in the first eight months of the year compared to the same period last year.

Google and Microsoft are moving some of their production lines from China to Vietnam, while Japanese appliance-maker Panasonic will move its production of refrigerators and washing machines to Hanoi. Some 15 Japanese enterprises received support from the government to move factories to Vietnam, according to a Japan External Trade Organization report.

Vo Tri Thanh, director of the Institute for Brand and Competitiveness Strategy, said Vietnam must prepare the best conditions to welcome investors in accordance with Resolution 50/NQ-TW of the Politburo on orientations for perfecting institutions and policies and improving the quality and effectiveness of attracting FDI until 2030. It details Vietnam’s priorities in FDI attraction, which focus on projects that apply new, high and clean technologies, practice modern governance, have high added value, and connections with global production and supply chains.

Southeast Asia is seen as an attractive destination for foreign investors. Countries in the region are well aware of a shift in investment, so they are quickly adjusting their FDI policies to grasp its opportunity.

Thu Phuong