Vietnam eyes FDI in green growth, digitalization: association

The annual report on FDI in Vietnam 2022, released by the Vietnam Association of Foreign Invested Enterprises (VAFIE) on Friday, highlights challenges and opportunities for the country in attracting FDI in green growth and digitalization.

The report shows that 68.5% of FDI businesses in 12 cities and provinces surveyed by the VAFIE rated Vietnam as a more favorable destination for investment than other locations. The country’s strengths are affordable costs, workforce, taxes, and the government’s responsiveness to emergency situations.

As many as 97.5% of survey respondents affirmed the workforce fulfill their demand. Manual workers and accountants were easy to recruit, according to 53.8% and 47.7% of surveyed firms respectively, followed by technical workers with 18.5%, supervisors with 13.8%, and executive directors with 6.2%.

However, there remain problems of corruption, complicated administrative procedures, underdeveloped infrastructure, and low quality of public services. In particular, 78.4% of surveyed firms had to allocate 5% of their time to process administrative procedures.

Regarding free trade agreements (FTA) with Vietnam’s participation, 78.3% of FDI firms said the ASEAN-China FTA (ACFTA) and Europe-Vietnam FTA (EVFTA) are the most impactful, followed by CPTPP with 73.3%, ASEAN Trade in Goods Agreement (ATIGA) with 72.9%, Japan-related FTAs with 71.2%, and South Korea-related FTAs with 62.7%.

67.1% of firms anticipate expansion in the next three-five years, while 24.1% eye to maintain their business scale. As many as 63.9% plan to add at least $1 million of capital to their operation, 36.1% with at least $10 million, while only 9% eyes smaller operations.

John Rockhold, chair of AmCham Vietnam, said green growth is the path for American and international companies and many of them are ready to implement carbon neutrality in 2030, much sooner than 2050.

"Trillions of U.S. dollars are available for investments in infrastructure, clean energy, ports, roads, railways, among others. However, the mechanism to get money into Vietnam for such investments is very difficult," he told the event.

AmCham eyes more interactions with the State Bank of Vietnam and the Ministry of Finance this year to work out mechanisms to bring money to Vietnam with suitable interest rates, especially for green growth projects, instead of the current double-digit rates, Rockhold added.

Delphine Rousselet, executive director at EuroCham Vietnam, said the VAFIE’s Report on FDI in Vietnam 2022 has comparable results with EuroCham’s Business Climate Index (BCI).

“Despite the challenging results of our last survey in early January regarding Q4/2022, our members continue to maintain a positive and confident outlook towards Vietnam," she noted.

EuroCham members highlighted three main barriers when they want to invest in Vietnam. The first is the lack of clarity regarding rules and regulations. Second is administrative procedures. The third is difficulties in getting visas and work permits for foreigners.

41% of the surveyed firms said they were shifting their operations from China to Vietnam, and 33% ranked Vietnam among the top five destinations for investment.

As of February 20, Vietnam attracted 36,611 FDI projects with total registered capital of $442.3 billion, according to the Ministry of Planning and Investment. Disbursement reached $267.5 billion, or 62.5% of registered capital.