Europeans getting taste for Vietnamese intentions

Alain Cany, chairman of the European Chamber of Commerce in Vietnam

What is the current status of capital flow from European enterprises into the Vietnamese market recently?

I am pleased with the continued strengthening of Europe-Vietnam economic ties. European groups are not only increasing overall inbound foreign investment but are also focusing on high-quality projects that will further develop Vietnam into a magnet for world-class investment.

Vietnam remains one of the most exciting, dynamic markets in the world. This is seen in our Vietnam Business Climate Index, our regular barometer of European business leaders and investors. For the first quarter of 2022, the index reached 73 out of a possible 100, its highest point following Vietnam’s peak of pandemic restrictions last year. Similarly, more than two-thirds of respondents expect the Vietnamese economy to improve in the second quarter. Hopes remain high.

After big groups like Samsung and LG built factory systems in Vietnam, new faces are also arriving like LEGO, Fuchs, and Pandora. What advantages do these corporations see in Vietnam?

Vietnam provides convenient access to East and Southeast Asia. Its workforce is also large and young, resulting in competitively priced labour.

Vietnam’s growth record is also proven, with a stable political system and economic policies aimed at global integration and improved socio-economic well-being. Likewise, its free trade agreements with much of the world are continuing to support integration into global markets and supply chains, and are gradually eliminating bottlenecks and trade barriers.

Part of this is geopolitical as well. The China-US trade conflict made many turns to Vietnam as part of a China+1 strategy. This has been intensified by the pandemic. Vietnam’s quick vaccine rollout allowed it to evolve from its previous approach, while China is still maintaining that strategy. China’s resulting restrictions have worsened supply chain and distribution issues, while at the same time boosting the appeal of Vietnam in comparison to China.

How can Vietnam attract new well-known enterprises to the market?

A big question mark for Vietnam is energy as its power grid is unprepared for increased renewable capacity. A grid overhaul will involve large amounts of time and funding. A green transformation with knowledge- and tech-sharing initiatives will help strengthen its grid and renewable capacity overall.

Vietnam must also reduce administrative difficulties by cutting confusing customs and company registration procedures. This can be solved with innovative digital technologies and procedures to reduce the costs, resources, and time required to do business. Increasing the transparency and straightforwardness of Vietnam’s investment legal framework will also help resolve national and regional contradictions.

Infrastructure improvements will also boost the movement of goods, materials, and people by linking Vietnam domestically and internationally. Vietnam’s workforce is by and large not located where it is most needed. This is a huge development risk. Investing in highways, high-speed railways, inland waterways, and so on will help solve regional labour shortcomings by connecting residential areas to industrial zones and providing convenient job access to those living outside of big cities.

In addition, Vietnam must focus on attracting firms that suit its sustainable development goals. This requires investment quality, not quantity. For example, high-quality investors provide the support needed for the government to raise electricity prices to help ensure a stable future power supply. Electricity price increases may disturb small-scale, low-quality manufacturers, but will not upset queen bees. Vietnam needs more investors who understand the big picture.