Upward trend providing new optimism

Vietnam’s improved investment climate has helped attract a large volume of foreign direct investment, Le Toan

Since 1996, FrieslandCampina, a leading dairy corporation in the Netherlands, has been expanded its manufacturing in Vietnam, with two factories in the northern province of Binh Duong and the northern province of Ha Nam, with total investment capital of $40 million.

“We are honoured to come to Vietnam early, among the first multinational corporations investing in Vietnam after doi moi, and proud to have played our role in the socioeconomic development of Vietnam in the past 26 years,” Berend van Wel, managing director of FrieslandCampina Vietnam (FCV), told VIR. “We always consider ourselves a part of Vietnam, a Vietnamese company by the Vietnamese and for the Vietnamese. We know we can only succeed in a successful and growing Vietnam.”

According to the Dutch Business Association Vietnam, FCV is among many Dutch firms considering Vietnam a good investment location, such as Heineken, De Heus, Shell, Unilever, and Shire Oak International, among others. “The Dutch have a history of hundreds of years of trading and doing business with the Vietnamese. The strong relationship between the Netherlands and Vietnam has become evident by the strong contribution of Dutch investors and foreign-invested enterprises (FIEs),” said Ywert Visser, international sales manager at Dutch-backed Mueller Asia, which supplies milk cooling tanks to dairy farms and milk collection points in Vietnam since 2014.

According to the European Chamber of Commerce in Vietnam’s (EuroCham) Business Climate Index (BCI) conducted by over 1,200 member companies in Q1, the BCI climbed to 73, once again reaching its highest point after the pandemic woes last year. This is a 12-point increase compared to the fourth quarter of 2021, in addition to nearly 58 points of growth compared to the third quarter, with business leaders now more upbeat after the relaxation of Vietnam’s pandemic-related restrictions and the continued acceleration of its economic development. “The BCI may sustain this upward trend next quarter, with a more optimistic business outlook from business leaders anticipated,” said EuroCham chairman Alain Cany. “Vietnam’s economic recovery is rapidly moving forward, with the country remaining one of the best performing and most exciting investment destinations in the world.”

Adam Sitkoff, executive director of the American Chamber of Commerce (AmCham Hanoi), said over the past decades, US companies and investors have contributed significantly to the growth of Vietnam’s economy. “This continues today as AmCham members represent billions of US dollars in foreign investment, tens of thousands of direct employees, hundreds of thousands of indirect employees, and a significant share of Vietnam’s exports and tax revenues.”

Marko Walde, chief representative at the Delegation of German Industry and Commerce in Vietnam, also said that Vietnam remains an attractive investment destination.

“German businesses are confident about their own business development. They expect a further revival of their own activities and are confident about business development in 2022,” he said. “About 55 per cent of German companies in Vietnam expect their own businesses to improve. Eighty-three per cent of survey participants intend to invest further in their activities in Vietnam.”

A key driver

Nearly half a century since national reunification, Vietnam has become a development success story. Economic reforms since the launch of doi moi in 1986 have helped propel Vietnam from being one of the world’s poorest nations to a middle-income economy in one generation. Since 2002, GDP per capita increased several times over, reaching almost $3,700, and poverty rates declined sharply from over 32 per cent in 2011 to below 2 per cent last year

“Thanks to its solid foundations, the economy has proven resilient through different crises. Vietnam was one of only a few countries to post GDP growth in 2020. GDP growth slowed down to 2.58 per cent in 2021 but is expected to rebound to 5.5 per cent in 2022,” said the World Bank just over a week ago.

Senior economic expert Nguyen Mai underlined that foreign direct investment (FDI) has become a bright colour in Vietnam’s economic picture as it has been an important and stable impetus for the economy over the past three decades and more. “Without FDI, Vietnam’s economy would have been unable to overcome the difficulties and reap the achievements it is witnessing today,” Mai said.

According to the General Statistics Office, as of March 20, the country attracted 34,815 valid foreign-invested projects registered at $422.83 billion. Vietnam wooed $38.85 billion worth of registered FDI last year, up 25.2 per cent on-year. In Q1 of 2022, total registered FADI reached $8.9 billion, and total disbursement was $4.42 billion, up 7.8 per cent on-year – the highest 3-month disbursement level over the past five years.

FIEs have been providing jobs for nearly five million direct local labourers and millions of indirect labourers. They hold 23-25 per cent of total national development funding capital, and create over 50 per cent of industrial gross output while helping the country develop a modern financial and banking system. They also hold 70 per cent of Vietnam’s total export turnover and are responsible for around 20 per cent of the state budget and 20 per cent of GDP.

Such big contributions have been made possible by the government’s consecutive creation of a favourable business and investment climate for investors, and their confidence in the country’s outlook.

“The stability and robust development of the Vietnamese economy offers numerous opportunities for investors worldwide. I call on investors to cooperate in safely resuming production to fulfil orders and maintain supply chains,” stated Prime Minister Pham Minh Chinh at the World Economic Forum last October. He is scheduled to attend the next forum at the end of next month in Switzerland.

New orientation

Under the resolution of the 13th National Party Congress held early last year, the Party has determined that FDI is an important part of the national economy with a big role to play in mobilising investment capital, technology, modern governance, and expanding export markets.

“A shift is to be made from attracting FDI in quantity to quality. Priorities are to be for projects with high technology and high added values, and with modern governance models, high spillover effects, connecting with domestic businesses,” stated a report passed at the congress.

PM Chinh committed, “The Vietnamese government will continue to provide every favourable condition for your investment in prioritised sectors with preferential benefits in Vietnam, such as advanced technology, information technology, supporting industries, smart agriculture, environmental protection, renewable energy, and infrastructure projects in service of social security.”

The government has established a special working group to address outstanding issues, the PM added. “Having considered FIEs as an important part of our economy, we pledge to protect the legitimate and lawful rights and interests of investors, and ensure the shared benefits of the state, investors, and labourers.”

Wel of FCV told VIR with the great support from the government, FCV Vietnam believed it can do more in Vietnam. “In 2022, we look forward to a brighter year, the pandemic will be controlled, with a better life for everyone. FCV will continue our mission through the commitments to better nutrition, better living for our farmers, better climate, and better packaging.”

Sitkoff of AmCham Hanoi also said as major investors here, American companies have an interest in Vietnam’s continued success.

“They are optimistic about business prospects in Vietnam and we support efforts to create a modern economy that will attract future investment and high-paying jobs for Vietnamese people,” he said.