Vietnam has gained a great success in welcoming an ever-accelerating flow of foreign investment into the country in recent years. However, a question on how the inflow will be next time is raised when many external factors can cause adverse impacts on it.
Foreign manufacturers are forecast to relocate their facilities from China to Vietnam
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Besides, many countries have recently also applied tightened monetary policies, which will cause a decline in direct and indirect investment inflows to emerging markets.
However, if considering its intrinsic value, Vietnam will still be a bright spot in attracting foreign investment thanks to its socio-political stability, according to Christian Kamm, chairman of US’s Kamm Investment Co.
In addition, Kamm said, Vietnam has a strong work force. Some 60 percent of the population is in the working age with increasing skills. Foreign investors, especially in the technology industry, will be more and more interested in the increasingly skilled workforce in Vietnam.
Kamm forecast that Vietnam will continue to retain its key position in the world’s map of attracting direct and indirect investment inflows after receiving a deep concern of global manufacturing giants, who have set up factories in the country and are increasing value-added investment.
If Vietnam continues to pursue policies to further ease foreign investment inflow to the country, foreign investors will be more interested in this market because they feel easy to do business and have the opportunity to develop here, Kamm said.
Sharing the same view, Andy Ho, VinaCapital’s chief investment officer, told local press that foreign investment in Vietnam has increased sharply in the past few years and this is expected to continue.
According to Ho, strong economic growth and economic stability, growing size of the stock market and the listing of many new firms, divestment from listed state-owned companies, and the government’s determination to reform the financial sector will give Vietnam a big advantage.
Vietnam’s equity market last month was added to FTSE Russell’s secondary emerging watch list for a possible future reclassification from its current frontier market status, Ho said, adding that it is also expected to be added to the watch list by Morgan Stanley Capital International (MSCI) for a possible upgrade from frontier to emerging market in the next one or two years.
The trade war between the US and China will make foreign investors relocate their manufacturing facilities from China to Vietnam, Ho said.
Skilled workforce needed
However, to attract more quality investors to Vietnam, Tomaso Andreatta, co-chairman of the Vietnam Business Forum recommended the country to improve the knowledge and skills of the workers so that they become more productive and, if more automation needs to be used to save the factory, they will know how to use and maintain it.
According to Andreatta, most companies coming to Vietnam are attracted by low labor and energy costs and tax incentives. However, salaries have been increasing much faster than productivity, reflecting the pure speed of the creation of new foreign-invested firms. If this trend continues, it will not be long before the companies that are employing large numbers of people in garments, shoes, and assembly will move to other countries.
While each firm should do some high-level training of its workers, it is important for independent vocational training companies to multiply and to be allowed a high freedom of curricula and organization, so that they can quickly adapt to the changing needs of the market, Andreatta suggested.
