Rare earths and semiconductors may contribute 5-10% to Vietnam’s GDP once the country can tap its critical mineral reserves and develop the industry, said Prof. Nguyen Mai, chairman of Vietnam's Association of Foreign Invested Enterprises (VAFIE).
Mai revealed his calculations at the Vietnam Industrial Park Forum 2023: Towards Green Growth, held by The Investor on Thursday.
Vietnam produced 4,500 tons of rare earths, critical minerals for semiconductor production, in 2022, and plans to exploit around 220,000 tons per year in the future.
This potential output will help to restructure the global rare earth market and attract investors from the U.S, EU, South Korea, and Japan. Rare earths and tungsten can also give Vietnam leverage with those partners, the veteran expert added.
He said that dozens of foreign firms have expressed interest in mining rare earths in Vietnam.
“Vietnam’s economy has never faced such a tough time as in 2023, but we have rare earths and tungsten to help us out. Currently, dozens of investors have lined up and met with the Ministry of Planning and Investment, guaranteeing Vietnam’s Prime Minister that rare earth exploitation will be increased," Mai noted.
Today, Vietnam’s two most important competitors for FDI are India and Indonesia. As a result, if Vietnam does not recognize this major obstacle and capitalize on it now and in the future, particularly given EU and U.S. chances, Vietnam will be unable to overcome it.
Mai commented that one of the major challenges for foreign firms entering the country is that Vietnam does not meet their standards, particularly in terms of intellectual property rights, petty corruption, and onerous investment procedures.
All of these challenges are intertwined with national administrative reform. “In the future, we will look for more synchronized and successful reform,” he added.
Expect more U.S. investors in Vietnam
Nguyen Cong Ai, deputy general manager of KPMG, said at the event that the increase of registered FDI in Vietnam by 7.7% in the first nine months year-on-year is an impressive figure given that Vietnam's economy is undergoing the most challenging period in its history. It is projected that FDI capital flows will expand considerably in the final three months of the year. In 2023, investors from North Asia (particularly Japan, South Korea, and China) will make up the majority.
“We also expect U.S. investors to participate more following President Joe Biden's visit to Hanoi in September,” Ai noted.
KPMG surveyed 200 FDI firms to determine what makes them decide to pour money into the country. The main factor is the locations of industrial parks (roads near airports), followed by human resources. Electricity and water infrastructure come next. A power outage of one hour per day, seven days a week, or a lack of electricity, like in the past, has a significant impact on foreign investors' confidence.
In terms of industries, KPMG believes that FDI capital will be heavily concentrated in manufacturing and processing, banking and finance, wholesale, retail, and real estate.
According to KPMG, there will be a shift in FDI capital flows between northern localities. Bac Ninh province is renowned having the highest rate of industrial development, however, FDI capital flows are shifting to neighboring Bac Giang province.