‘Vietnam Must Act Now’: Foreign Investors Warn Of Lost Opportunities

Following the success of six Vietnamese startups that received fresh capital amidst the pandemic, foreign investors seem to have not lost their trust and confidence in Vietnam with the stable FDI inflows to the country, at least from January to August this year.

According to the Foreign Investment Agency, Vietnam has approved 1,135 projects in the first eight months of 2021 incorporated with a nearly US$11.33 billion FDI commitment. FDI into greenfield projects in the country may have dropped by 36.8% in number but it has surged to 16.3% year-on-year. 

The projects that are considered ‘greenfield’ are those that lack constraints imposed by prior work on the site. Generally, what a greenfield project entails is development on a completely vacant site. A ‘brownfield’ project on the other hand is one that carries constraints related to the current state of the site.

The majority of the FDI projects are concentrated in big cities that have adequate infrastructure systems which is why Ho Chi Minh City has 34% of the new projects, followed by Hanoi with 21.5%. 

Unsurprisingly, of the 58 cities and provinces that received FDI in the January-August period, the southern province of Long An has attracted the largest portion of capital commitments with US$3.6 billion, or 18.9% of the total. HCMC followed with nearly US$2.2 billion (11.4%), the southern city of Binh Duong with US$1.7 billion (8.7%) came in next. 

Long An is considered a promising investment hub, linking HCMC and the Mekong Delta region. The province’s exponential economic growth, large industrial land area, improving infrastructure, and effective administrative system are vital components of its growing FDI attractiveness, reads an article released by Dezan Shira and Associates in May this year. 

Long An provincial authorities proposed to develop a 32,000-hectare super economic zone. Once completed, it will be one of the largest economic zones in Southern Vietnam.

Although down by 11%, 460 existing projects have been injected with additional US$5 billion, a 2.3% increase in the capital, the FIA report revealed. 

In the same period, foreign investors contributed 2,720 projects and had nearly $2.81 billion in the capital, down by 43.4% in the number of projects and 43.4% in value year-on-year.

In general, while the disbursed amount went up by 2% to $11.58 billion, the total FDI commitments to Vietnam in the first eight months of 2021 declined by 2.1% year-on-year to  $19.12 billion.

“The amount remains positive amid severe COVID-19 impacts that are forcing many factories and plants to close or scale down operation,” the FIA commented.

However, with the current situation in these major economic hubs, Vietnam may see more declining numbers toward the end of the year if the restrictions won’t be lifted, delaying economic reopening. 

AmCham, EuroCham, and others urge to make haste in reopening

Vietnam’s foreign business associations including the American Chamber of Commerce (AmCham), the European Chamber of Commerce (EuroCham), the Korea Chamber of Commerce in Vietnam (KoCham) and the US-ASEAN Business Council (US-ABC) proposed a “pandemic prevention and control by region” strategy to the Vietnamese Prime Minister in an effort to restore safe production and business activities. 

They’ve requested for Vietnam to devise a roadmap for reopening right now so the country can maintain its regional and global competitiveness and not be left behind in the economic recovery. 

With full support for the Vietnamese government’s “twin goals” and the PM’s policy of “safe coexistence with the pandemic,” AmCham, EuroCham, KoCham, and US-ABC said they are optimistic about the future of Vietnam. 

“We believe in the strength and resilience of the Vietnamese people and the Vietnamese economy. We are committed to accompanying Vietnam and making long-term investments,” they guaranteed. 

However, since business plans are being delayed due to current uncertainties and health risks, the lack of a reopening plan would impede foreign investment for the country. As a result, new potential investors can’t come in the absence of reasonable policies for the entry of foreigners.

In addition, foreign investors also warned Vietnam that if the country could not prove to be a reliable alternative, it would miss a great opportunity to take advantage of supply chain diversification moving from China. 

“To maintain regional and global competitiveness, including against Malaysia, Indonesia and Thailand, “Vietnam must act now,” suggests the foreign business associations.

For them, vaccination is key for the country’s safe economic reopening and recovery. Furthermore, they suggested that vaccine passports and the COVID-19 green and yellow card system should be part of the reopening strategy of Vietnam. The foreign business associations believe the government should consider this as the right time to plan to safely reopen tourism.