Different approach required for Vietnam to further integrate into global value chains

Vietnam is in need of different approach to further integrate into the global value chain and take advantage of the early containment of the Covid-19 pandemic to become an ideal destination for foreign investors, according to experts.

Production at Sunhouse Group. Photo: Dinh Nguyen.

Due to the current Covid-19 crisis, there would be a shift of investment capital from China to other countries as foreign investors look to diversify their global value chains. In the case of Vietnam, the country’s successful containment of the Covid-19 and drastic measures to improve the investment environment have drawn attention from multinationals.

Therefore, as Vietnam has become a potential investment destination in the wake of the US – China trade war, more investments are expected to flow in amid the Covid-19 pandemic.

However, the question would be which solutions are needed to attract this capital inflows and utilize them in the most efficient way.

Phan Huu Thang, former director of the Foreign Investment Agency (FIA) under the Ministry of Planning and Investment, said many think with the Covid-19 being put under control, foreign investment capital would certainly flow into Vietnam. “But things do not go that way,” he warned.

Sharing the same view, President of Sunhouse Group Nguyen Xuan Phu said Vietnam is facing numerous risks from low quality FDI, especially environmental pollution as Vietnam has become an assembling base for foreign firms.

Phan Huu Thang suggested during the process of FDI attraction, Vietnam should remain steadfast in pursuing long-term goals, including the target of becoming an economy with high independence and ensuring social and national security.

Phu from Sunhouse said during the process of apprehending FDI capital, local firms should be active in learning from their foreign partners to improve expertise and master new technologies.

Phu added there are three phases in the shift of investment capital, including a production shift, capital shift and order shift, adding order shift is the easiest one.

“Vietnamese companies could see which phase best suits their situation and prepare accordingly,” Phu said.

Vice President of the Vietnam Association of Foreign Invested Enterprises (VAFIE) Nguyen Van Toan said Vietnam should be selective in attracting FDI, while local firms are required to join the production process with high technological content to move further up in the global value chain.