Guiding light for next-gen FDI strategy

Highlights of Vietnam’s draft new-generation FDI attraction strategy

One of the highlights in the upcoming strategy is the change in the country’s FDI attraction orientations and investment ­incentives focusing on output quality and contributions to the domestic sectors. These include the value chain, added value, application, and transfer of high technology, as well as research and development and innovation, rather than the previous focus on location, sectors, and investment scale.

In addition, Vietnam will also concentrate more on financial supporting policies, for example incentives on ­lending interest rates and trading rights, instead of focusing on tax and land incentives as it does currently.

The top priorities for FDI attraction in the coming years will include IT and telecommunications, advanced ­electronics, automobiles, agricultural machinery, supporting industries, research and development, the Internet of Things, and Artificial Intelligence, among others.

Other priority sectors include processing and manufacturing to serve hi-tech agriculture, healthcare, logistics, and renewable energy. Furthermore, the country will continue attracting FDI into the sectors that Vietnam has advantages in, such as textiles and garments or footwear, with a focus on high added value, smart production, and automation.

Bruno Angelet - Former head of the European Union Delegation to Vietnam

FDI has proven to be a major driver of Vietnam’s economic development and has contributed to the impressive growth rates averaging 6.5-7 per cent over the past decade. FDI has created resources for the government and jobs for the Vietnamese people.

With its population of almost 100 million, the Vietnamese market is extremely attractive for investors. Besides, a network of free trade agreements concluded by Vietnam offers competitive access to other markets. These are the factors that can make Vietnam an important destination for investment in the region.

However, after more than 30 years of this rapid economic development, Vietnam needs better investment that will leave more value in the country, and create higher-skilled jobs that would support the government’s policy of sustainable development respecting the environment and the society. The next generation of FDI is needed for Vietnam to continue its impressive economic development path and upgrade the profile of its economy.

The EU can offer investment in high-tech, environmentally friendly, and less energy-intensive sectors. European businesses do not only bring technology and quality jobs but also responsible business practices. This quality European investment can create useful links with local companies and integrate them in global value chains.

Marko Walde - Chief representative, German Industry and Commerce Vietnam

FDI was and is still playing a huge role in Vietnam’s rapid development. First of all, in the past Vietnamese companies, although hardworking and creative, did not have sufficient capacities and experiences to start a modern project on their own. So FDI helps a lot to modernise the country.

Second, FDI also brought know-how, technologies, and qualified workers to Vietnam. That is why Vietnamese companies were not just able to improve their product and service quality but also their production process and management methods. So FDI is partially responsible for Vietnam’s growth and for bringing capital stock and knowledge so that Vietnamese companies could eventually start their own projects.

On behalf of German investors, I would say that they are always highly interested in co-operating with Vietnamese companies in the same region, for example as potential suppliers or as service providers. Thus, Vietnamese companies could also benefit from a foreign investor in the region.

Germany is a very export-oriented economy, engaged in a lot of international business. German companies have to be present on the most promising markets, and one of them is Vietnam. It has a fast-growing middle class, desiring to catch up on consumption and an industry requesting for products and technology of high quality.

Denis Brunetti - President, Ericsson Vietnam and Myanmar

Over the past 30 years, Vietnam has successfully orchestrated a phenomenal socio-economic development journey, averaging over 6 per cent of teh GDP and transforming itself into a middle income economy. This amazing achievement was fuelled by over $350 billion of FDI which was primarily focused on low-cost and labour-intensive manufacturing and production.

The government wisely recognises that for Vietnam to continue enjoying sustained and inclusive GDP growth, avoiding the middle income trap, the next wave of socio-economic development and prosperity will need to be driven by science, technology, and innovation-centric FDI. Ericsson supports and is aligned with the government’s vision of promoting hi-tech FDI to Vietnam, enabled by 5G Internet of Things (IoT) connectivity across the nation, digitally transforming all industries.

Ericsson is committed to driving Industry 4.0 and industry digitalisation in Vietnam through our investments in mobile broadband networks across Vietnam, including 3G and 4G IoT, and soon 5G. Ericsson recognises that for Vietnam to attract good-quality hi-tech FDI, it needs to have high performing mobile broadband network infrastructure across the nation – indeed, this mobile data network connectivity is the infrastructure that is needed to build smart cities and digitally transform industries, such as manufacturing, agriculture, energy, transport, and retail through the growing digital economy.

Hannu Hyttinen - Managing director, Nefab Vietnam

It is amazing how the Vietnamese government can develop in the best directions. Manufacturing has been an attractive industry among foreign investors in Vietnam for years. Japanese, South Korean, and others have been here for a long time, and now a lot of Western companies have come. In the new development period, manufacturing still remains important in the country’s FDI picture. I like to see that the Vietnamese government is taking close steps now to attract more, quality foreign investment.

Our company has been present in Vietnam for four years, and is operating in five countries. Currently, we have a small manufacturing facility in Vietnam, focusing on packaging solution for our hi-tech customers in different industries such as ABB, General Electric, and Schneider Electric, among others. As we are growing in the country, we are thinking about a new plant in the south of the country to meet growing demands.

With the new incentives, the new FDI attraction strategy will help Vietnam attract more foreign investment.

Seck Yee Chung - Vice president, Singapore Business Group in Ho Chi Minh City

The business environment in Vietnam is very encouraging. The country is known for its good resources, and especially now it is involved in international trade and investment agreements. There has been a rise in development and population growth, and so more people enter the workforce, colleges, and teh customer-base. So I think they all contribute to healthy opportunities for investment.

However, Vietnam also has concerns and has struggled a bit when it comes to new sector facilities, especially in technology or sectors related to innovation. The government should spend a lot of time researching and encouraging businesses to continue to run in Vietnam, especially in the energy sector.

It should also spend time studying new business models in the region and around the world. In addition, the government should spend more time to speak with businesses, whether they are technology companies or local startups, to understand what these new models look like.

Patrick Downey - Managing director, AsiaIDA Ltd.

During my 28 years in Vietnam, I have been privileged to witness businesses substantially grow here. This is due to a large extent on the hardworking and progressive nature of its people with support from the government legislation focused on the country’s steady growth and development, which based on current developments is continuing.

The Vietnamese government’s FDI approach and supporting policies will further add to and increase the country’s growth and development by attracting more foreign companies and entities, particularly those who recognise that first-class manufacturing facilities are available, or can be established at a reasonable cost.

Furthermore, the government’s positive approach continues to open up new opportunities and operational benefits. These include access to the growing Vietnamese market and other Asian and world markets.

These opportunities and benefits created by positive FDI developments will further open up beneficial technology transfer and related opportunities, thus highlighting the considerable advantages of Vietnam as a business base.

To maximise the benefits for all parties concerned, the Vietnamese government authorities and departments need to adopt a highly supportive customer-centric approach in the implementation and support of these new FDI developments and initiatives.

Linson Lim - President, Keppel Land Vietnam

Amidst the volatility of the global economic landscape, with concerns over trade tensions between the United States and China as well as slowing global growth, the Vietnamese economy may also be impacted. Notwithstanding that, we are confident of Vietnam’s long-term prospects and are committed to further strengthening our presence in Vietnam, with a focus on Ho Chi Minh City, which we believe will continue to be one of the country’s key growth locomotives.

Over the years, the Vietnam government and Ho Chi Minh City authorities have taken active steps to strengthen the country’s socio-economy and support enterprise growth. Foreign investors such as Keppel Land endeavour to bring into the market disruptive technologies, latest know-how and best practices.

At the same time, amidst a fast-changing technological and economic landscape, we have to be prepared to take on market risks.

We are glad that the local authorities in Ho Chi Minh City have been very supportive of investors and have helped to create an environment conducive to overseas businesses. We look towards the continued support of the authorities to help these companies mitigate investment and operational risks through clarity of policies and making the approval processes for projects more transparent.

Such improvements will enable companies like ourselves to make investment decisions with greater confidence, operate more efficiently and contribute more effectively to the city’s development.

Raymond Mallon - Senior economic advisor, Australia-Vietnam economic reform programme

The country needs to have a sustained focus on equitable provision of best quality basic education, including foreign language training, with a renewed focus on developing university and vocational education.

The country should also look at policies to boost research and development, including greater collaboration between industry and academic researchers. Besides that, it is necessary to work with business to look at areas where intellectual property rights need to be better protected to encourage in increased research and development.

The government also needs to invest in creating a good environment to attract the best possible talent to stay in and/or move to work in Vietnam.

I also would like to stress that despite big FDI into Vietnam, there remains a weak link between domestic and foreign enterprises. To enhance this link to ensure the interests of foreign businesses and the growth of domestic ones, the most important thing is to focus on building a strong domestic private sector with a significant number of the medium and larger size firms that are likely to be most attractive for foreign firms to work with.