Recently, AES Corporation from the US expressed its willingness to invest in Son My 2 gas-fired thermopower project under the build-operate-transfer (BOT) format. The investment by AES is expected to be an opportunity for Vietnam to eliminate outdated technologies and access modern ones.In fact, AES Corporation, which is a Fortune 200 global power company, is among a few American big investors in Vietnam.
The Mong Duong power plant was invested by US’s AES Corporation
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According to data from the General Statistics Office, American investors have so far registered to invest in 862 projects with total investment capital of roughly $9.9 billion in Vietnam, accounting for some 3 percent of total FDI in the country.
Investment by European countries to Vietnam has been also unnoticeable, of which the Netherlands has committed $8.3 billion worth of investments, France $2.8 billion, Luxembourg $2.3 billion and Germany $1.6 billion.
These figures, when compared to Asian countries pouring capital into Vietnam such as South Korea with $59 billion, Japan with $49.8 billion, are very modest.
In fact, FDI into Vietnam, including in the form of direct investment as well as investment through M&A, shows that capital flow from Asian investors predominates over that of the US or EU.
Meanwhile, both the US and EU many times have stated that they will become the leading foreign investors in Vietnam. Despite the strong will of pushing up investments in Vietnam, the capital from the EU and the US are still far below expectations.
Improved investment climate needed
Nguyen Van Toan, Vice Chairman of the Vietnam Association of Foreign Investment Enterprises, gave two reasons why the US and EU investment in Vietnam has remained insignificantly.
First, he said, it was transparency in investment relations, economic relations as well as administrative procedures. What American and European investors want is a business environment which ensures transparency and healthy competition.
The second was the limited capacity to absorb capital flows in Vietnam. "When they bring the capital and technology to invest, but how Vietnam does to absorb that capital and human resources would do to keep up with technology and infrastructure issues?", Toan questioned.
Nguyen Quang Bao, Deputy General Director of Viet Capital Securities JSC, said that US and EU investors are very interested in Vietnam market but less successful than Asian ones. The Vietnamese market is small, while the demands for high transparency and cultural differences make them hesitate.
While Asians understand Vietnamese and they can be ‘flexible’ when doing business with Vietnamese and ‘patient’ when working with Vietnamese agencies, Europeans and Americans only ‘act in accordance with the rules’. They want everything to be predictable and transparent.
Vietnam therefore needs to take action to continue improving the business and investment environment not only to lure more investors from the US and the EU, but also to implement commitments in bilateral and multilateral treaties and new-generation free trade agreements, experts suggested.
In the country’s new-generation FDI attraction strategy for 2018-2030, the Ministry of Planning and Investment also noted though Vietnam is attracting investment efficiently from Japan and South Korea, in the long term, the country must attract more investors from other parts of the world such as the US and EE to diversify its FDI sources.
