Vietnam is facing more challenges to attract more foreign direct investment (FDI) as traditional sources of overseas capital are looking for opportunities closer to home.
It was a concern raised by the Vietnam Association of Foreign-Invested Enterprises (VAFIE) at the second annual report on foreign investment in Vietnam for the year 2022, released last week.
Professor Nguyen Mai, chairman of VAFIE and author of the annual report, shared specific examples. He said, "The United States has decreased corporate income tax from 25 to 21 per cent, while also reforming investment licenses procedures. In addition, the government is applying high taxes on imported products to increase the competitiveness of several industrial sectors, such as energy, automobiles, steel, and aluminium."
Mai added that the US is also promoting a “prosperous economic network” that connects allied countries to build supply chains of products such as semiconductors and 5G-remated technology.
“Some countries in the EU, such as Germany and Italy, are trying to limit investment in overseas markets, while France is encouraging its enterprises to expand their operation in high-value sectors, such as automobiles, aviation, and digital technology,” Mai added.
Japan and Korea, the top two foreign investors in Vietnam, are also applying significant policies that are encouraging their companies to seek investment opportunities at home. Notably, Japan has spent $2 billion supporting Japanese manufacturers to return their production from China. Korea is also trying to attract its investors back to the peninsula.
Last year, Indonesia attracted $45.6 billion in FDI, up 44.2 per cent on-year, which was the highest growth globally. China, despite the country being effectively closed due to the pandemic, saw its FDI surge by 6.3 per cent on-year. India was reported to have attracted $83.6 billion in overseas capital for the same period.
To encourage foreign investment, especially from the US and EU, Vietnam needs to adjust regulations to remove barriers for investors. Delphine Rousselet, executive director of EuroCham, said, "There are three barriers that are currently discouraging more EU capital, including unclear regulations, overly complicated administrative procedures, and a restrictive visa system."
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