Jun 11, 2019 / 09:01

Vietnam sees new movement of FDI inflows

The investment inflow from China to Vietnam is seeing big changes with large investors pouring into the country, instead of just small ones as previously.

Instead of pouring only in small-sized projects, large foreign investors are targeting Vietnam as their destination with many billion-dollar projects in the pipeline.
Caption: More mammoth FDI projects will be licensed in 2019
Caption: More mammoth FDI projects will be licensed in 2019
Binh Duong province’s Department of Planning and Investment said it will soon license the first billion-dollar project in 2019 for Hong Kong’s Wai Chi Kai Knitting Company.
Located in Dong An 2 Industrial Park, the Weijia Textiles Vina venture aims to benefit from huge export opportunities given by the Comprehensive and Progressive Agreement for Trans-Pacific Partnership.
Other potential billion-dollar projects include the US$4.3 billion US-backed Energy Capital-invested gas-to-power project in Bac Lieu Province, and the long-awaited US$4.6 billion ExxonMobil initiative in Quang Nam Province.
Up to now, the Bac Lieu People’s Committee has been urging the Ministry of Industry and Trade to fast-track the appraisal process in order to add the gas-to-power project to Vietnam’s Power Development Master Plan VII, finish funding procedures, and then license the foreign investor.
In addition to these three mammoth projects, other major plans are finalizing procedures to be licensed this year. They include the US$500 million project of South Korean-invested Hana Micron, which has so far signed a co-operation agreement with the Bac Giang Industrial Zones Management Authority in Bac Giang province to develop a hi-tech and semiconductor device factory.
Notably, the investment inflow from China to Vietnam is seeing big changes with large investors pouring into the country, instead of just small ones as previously.
The Chinese investment inflow to Vietnam has been surging significantly this year, with Chinese invested projects beginning to appear in the list of large projects subject to be licensed each month, including the US$280 million ACTR tire manufacturing project in Tay Ninh Province and a US$214.4 million project by the Advance Vietnam Tire Co., Ltd in Tien Giang Province.
Uptrend to continue
According to Stephen Schwartz, Fitch Ratings’ Head of Asia-Pacific Sovereigns, Vietnam remains successful in attracting FDI in the export-oriented manufacturing sector.
Latest reports from the Ministry of Planning and Investment’s Foreign Investment Agency also showed FDI pledged to Vietnam in the first five months of this year hit a four-year high of US$16.74 billion.
The FDI inflow also represented a yearly increase of 69 percent to US$7.3 billion, the report said.
“We expect this trend to continue given the country’s low cost advantage and its strong global supply-chain linkages,” Stephen said, adding escalating trade tensions pose a risk to the external outlook, but Vietnam may partially benefit from some relocation of firms’ manufacturing from China to Vietnam, although this may take a long time to materialize.
According to experts, Vietnam has become an attractive destination for foreign investors, buoyed by its free trade agreements, close proximity to major global supply chains, high economic growth potential and the government’s success in improving the investment environment.
However, to better draw big and high-tech FDI projects, the government still needs to take more measures as there remain several hindrances in attracting the fresh investment inflow.
“The government should continue to improve business and investment transparency and safeguard intellectual property rights because investors from developed countries, including the US, often demand a transparent and consistent investment and legal environment,” Nguyen Van Toan, vice president of the Vietnam Association of Foreign Invested Enterprises, said.
“It is also necessary to put investment protection regulations in the laws since multinationals with high-tech projects are very interested in this. They must be assured that their legitimate rights will be secure,” he suggested.
Besides, Toan also urged the government to focus on training to make the country more attractive to foreign high-tech investors as skills of the country’s workforce remain limited.