Experts: VN must take steps to attract FDI leaving China

VIETNAM has some great advantages while competing with regional countries in attracting capital flows moving out of China after the Covid19 pandemic, experts have said.

A report by US-based SSI Research said foreign projects set up in industria l parks in t he countr y were up 32 per cent year-on-year in the first four months of the year to $ 9.8 bil lion.

The pandemic has shown that many large countries’ supply chains are heavily dependent on China, and they have taken drastic steps to cut this dependency.

Many large US, Japanese and European companies are gearing up to shift production away from China. Vietnam is one of their destinations besides some others in the region such as Indonesia, Thailand and Malaysia.

The report said: “Compared to Indonesia, which directly competes with Vietnam in attracting FDI [foreign direct investment], Vietnam has the advantage of proximity to China.

“Vietnam also offers support to businesses, with many incentives for large FDI projects, and has a lot of free trade agreements in which Indonesia does not participate. Recently the Vietnamese dong has been very stable compared to the Indonesian rupiah.”

Vietnam Association of Foreign Investment Enterprises vice-chairman Nguyen Van Toan said the opportunity to attract the FDI wave looking to relocate from China is quite clear, but not really big, and whether the opportunity can be grasped depends largely on Vietnam.

“We also need to be aware that investors will not easily pull out all investment from China because that country has great advantages such as a strong work force, good use of technology and products for all market segments, not just the affordable segment.”

Vietnam would face difficulties in competing with so many rivals to attract a part of the capital flows moving out of the neighbouring country, he said.

Experts agreed that to compete in the race, the country would need to change its way of attracting FDI and quickly.

Phan Huu Thang, former director of the Foreign Investment Agency, said: “[ We] will fail if we try to attract foreign investment in the traditional way.

“For example, India has immediate policies to allocate land, prepare infrastructure, identify potential investors to approach, announce tax reduction plans.

“Investors are gearing up to shift their production. If we continue to act slowly, we will miss an opportunity that comes once in 100 years.”

Toan said Vietnam needed to further improve its business and investment environment and administrative procedures.

He believes that Ho Chi Minh City, which leads the country in FDI attraction, has all the conditions and capacity required to make good use of this opportunity.