FDI attraction expected to grow five percent

Concern about production stagnancy

A preliminary assessment report on Covid-19’s impacts on the global and Vietnamese economies, compiled by a team of researchers from the Training and Research Institute of the Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV), shows that the epidemic has created new challenges but is also expected to offer new opportunities for investment. China currently is Vietnam’s seventh largest foreign investor with 2,875 ongoing projects with total registered capital of US$16.3 billion, accounting for 4.4 percent of total registered FDI in Vietnam.

Many projects and companies employ large numbers of Chinese experts and workers involved in important production stages as well as the management of projects and businesses.

The report indicates that measures to tackle the spread of Covid-19 have hindered many Chinese workers from coming back to Vietnam to work, causing direct impacts on projects as well as production and business activities of many companies, and affecting the incomes and lives of those working for related projects and companies.

Another assessment report on Covid-19’s impacts on Vietnam’s socioeconomic development, compiled by the Ministry of Planning and Investment, shows that the epidemic will lead to a decline in both short and long-term investment in the entire Vietnamese economy, especially investment by foreign-invested and non-state businesses.

Many FDI companies in Vietnam have also shared their concerns about the epidemic’s impacts on production and business activities. Large companies such as Samsung, LG, Formosa, Apple, Toyota and Honda have complained about a lack of input materials due to difficulties in importing from China, as well as a lack of workers due to the blockade, isolation or restriction of travel by Chinese workers and experts, which is required to prevent further spread of Covid-19. LG, for example, complained that if the epidemic continues to spread in the next two weeks, the company will face a shortage of production materials. Formosa affirmed that blocking import of steel materials from China will affect the progress of production and sales. Apple’s schedule to increase exports from Vietnam by 30 percent in 2020 will also be affected as its output depends on original equipment manufacturers (OEMs) such as Samsung, Foxconn and LG.

Opportunities for new FDI projects

Despite the direct impacts of Covid-19 on production and investment, the BIDV research team expects the epidemic will bring Vietnam opportunities to attract new FDI projects, because concerns about the epidemic will encourage investors to find new destinations for their FDI projects in China and its territories, such as Hong Kong and Macao.

Although Vietnam is said to be highly vulnerable to Covid-19, the international community appreciates the country’s proactivity and determination in preventing the spread of the epidemic, as well as the Vietnamese government’s efforts to further improve the business environment. The BIDV report forecasts FDI in Vietnam in 2020 will possibly grow about five percent compared with 2019, a 2.2 percentage point drop compared with 2019’s growth.