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Nov 29, 2017 / 11:17

Attracting FDI from Europe: Removing the bottleneck of intellectual property

Nguyen Tung

Considered as one of the countries with high attraction for Foreign Direct Investment (FDI) investment, however, FDI from Europe to Vietnam has not increased as expected.

According to the Foreign Investment Agency of the Ministry of Planning & Investment, as of October 2017, Vietnam has attracted 312.9 billion USD of FDI from 122 countries and regions in the world. However, the majority is coming from Asian countries, while FDI from Europe to Vietnam has not increased as expected.
 
Vietnam has been ideal destination for FDI attraction.
Vietnam has been ideal destination for FDI attraction.
Specifically, 4 countries and regions with the highest amount of FDI invested in Vietnam are Korea, Japan, Singapore and Taiwan. As such, Korean investors have invested in Vietnam with amount of 57.10 billion USD, contributing to 18.2% of total FDI to Vietnam; Japan is in the second place with 46.32 billion USD, contributing to 14.8%; Singapore in third place with 41.71 billion USD, contributing to 13.3% and Taiwan in the fourth place with 30.75 billion USD, contributing to 9.8%. Besides, other Asian countries have also invested significantly to Vietnam such as Malaysia, China, and Thailand. With this being said, total FDI of these countries into Vietnam has been more than 222 billion USD, contributing to above 70% of total FDI into Vietnam. 

On the opposite direction, FDI from Europe to Vietnam has been limited. Statistics from the Ministry of Planning & Investment showed that European country with the highest FDI investment in Vietnam at this point of time is Netherlands with 229 projects for registered capital of 8.04 billion USD, contributing to 8.04% of total FDI into Vietnam. After that is Britain and France with FDI amount of 3.4 billion USD and 2.7 billion USD respectively, which are equivalent to under 1% of total FDI investment in Vietnam. As such, these numbers are quite low compared to the current potential and expectation. 

From economic expert’s point of view, one of the reasons why European countries have not invested heavily in Vietnam is that, in addition to the difference in culture and mindset, despite the improving business environment in Vietnam in recent years, the Vietnam’s market scale is quite small and could not absorb efficiently the FDI from European countries. On the other hand, European enterprises are concern over the issue of intellectual property rights (IPR), which has not received appropriate attention in Vietnam and potentially lead to numerous risks when investing. 

With regard to the IP issue. At the Vietnam Business Forum in the end of June 2017, Vice President of the European Chamber of Commerce in Vietnam (EuroCham) Tomaso Andreatta said, despite Vietnam has significantly improved the legal framework on implementing the IPR, the implementation process of this law is still not up to standard. Therefore, it is vital for Vietnam to put up more effort in strictly implementing the IPR to encourage more European investors investing in Vietnam. 

In order to attract FDI from Europe, EuroCham proposed to the Vietnamese government to strictly deal with cases of violating IPR. Especially, foreign investors often settle dispute through international arbitration, which is indeed for case involved with large investment, so that the Vietnamese government need to actively encourage the court system to implement the international arbitration’s decisions. 

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