Foreign investment flow pumped heavily into Vietnam

In the first four months of this year, foreign investment flows still poured strongly into Vietnam, with a total capital of US$10.13 billion, an increase of 18.5 percent year-on-year. This is a positive signal, promoting economic development in the context that the whole country has been joining hands to prevent the Covid-19 pandemic.
Foreign investment flow pumped heavily into Vietnam  ảnh 1 Production at MTEX Company (Japan) in Tan Thuan Export Processing Zone. (Photo: SGGP)

Improved investment environment

The representative of the General Statistics Office of Vietnam said that up to 85.1 percent of enterprises surveyed assessed that production and business activities in the second quarter would be better and more stable. Of which, 51 percent of enterprises rated the situation would be better and 34.1 percent enterprises said that it would be stable. Only 14.9 percent of enterprises concerned that the situation will be more difficult than the previous quarter. The foreign-invested sector was fairly optimistic, with 86.2 percent of enterprises forecasting better and stable business and production situations in Q2 compared to Q1.

In fact, from the beginning of the year until now, orders at enterprises have increased heavily. Mr. Nguyen Tuan Anh, CEO of Cat Thai Manufacturing and Trading Company, said that from the beginning of the year until now, the company has worked almost nonstop, even during holidays. The company's 1,600 workers have had to maintain production for three shifts per day to timely meet the company's export orders.

In general, compared to the end of last year, in the first quarter of this year, the number of orders of 27.8 percent of enterprises was higher; that of 41.7 percent of enterprises was stable; that of 30.5 percent of enterprises was decreased. Acknowledging the situation in Q2, 47.5 percent of enterprises expected orders to increase, 39.1 percent of enterprises expected stable orders, and only 13.4 percent of enterprises expected orders to decline. As for export orders, in the second quarter of 2021, 37.5 percent of enterprises are expected to increase new export orders, 47.5 percent to be stable, and 15 percent to decrease.

The Ministry of Industry and Trade (MoIT) also assessed that import and export activities have been taking place positively. From the beginning of the year up to now, export turnover is estimated at $77.34 billion, up 22 percent year-on-year. The US remains the leading export market of Vietnam, followed by China, the EU, South Korea, Japan, and the ASEAN.

The representative of the MoIT said that the ministry coordinated with the Vietnam Institute of Business Administration and Digital Economy (VIDEM) and the Vietnam Association of Small and Medium Enterprises (VINASME) to establish and put into operation the Vietnam-EU e-commerce platform (Vefta). This platform will help Vietnamese and European enterprises, as well as other international partners, to easily connect and conduct commercial activities. It is also a portal to help to build a complete digital ecosystem through digital solutions to help enterprises conveniently perform connection and trade activities on a single platform (digital payment, logistics, electronic invoices, and digital signature). The introduction of this e-commerce platform also helps to resolve the trade disruption caused by the current complicated Covid-19 pandemic.

Urging domestic enterprises to accelerate

Favorable developments in the market together with the successful control of the Covid-19 pandemic have created a strong driving force to attract foreign investment into Vietnam. Most recently, on April 11, South Korea’s Kumho Tire Group, operating in the field of car tire manufacturing, announced an additional investment of $300 million in a car tire factory in Vietnam. Previously, several large enterprises, namely Samsung, Intel, CJ, SCG, and Panasonic, quickly expanded the presence of their manufacturing factories in Vietnam.

In the meeting to announce the investment situation of Japanese enterprises in Vietnam, Japan External Trade Organization (Jetro) also affirmed that Japanese enterprises are promoting investment in Vietnam. Of which, sectors with the most potential attraction are manufacturing, processing, and food and foodstuff.

Foreign investment flow pumped heavily into Vietnam  ảnh 2 Production at MTEX Company (Japan) in Tan Thuan Export Processing Zone. (Photo: SGGP)
According to Mr. Hirai Shinji, Chief Representative of Jetro in Ho Chi Minh City, the number of enterprises wishing to expand the market share in Vietnam increased sharply. Currently, Vietnam is among the top ten major markets for Japanese goods. Accordingly, the export turnover of Japanese agricultural, forestry, seafood, and foodstuff products to the Vietnamese market has surged by more than 17 percent compared to 2019. Regarding this matter, the representative of Japanese multidisciplinary group Sojitz said that this group has just reached an agreement to establish a joint venture with Vietnam Livestock Corporation (Vilico), whose dominant capital is held by the Vietnam Dairy Products Joint Stock Company (Vinamilk), with an initial investment capital of $2 million. This joint venture will import, process, and sell beef products in Vietnam. According to Sojitz, the current demand for beef in the Vietnamese market is 500,000 tons per year and is expected to increase strongly because per capita income is increasing rapidly. In the opposite direction, many domestic enterprises have also increased their production scale to keep pace with the trend of investment shift of foreign-invested enterprises to Vietnam. Mr. Do Phuoc Tong, Chairman of the Board of Members of Duy Khanh Engineering Company, said that the company has just invested VND186 billion to build the Duy Khanh mechanical precision factory to be able to participate in supplying products to FDI enterprises. Particularly in the processed food industry, Vinamilk has quickly expanded its investment scale in the dairy farming system to increase the source of milk for production. Up to now, Vinamilk has exported its products to 56 countries and territories, with a total turnover of more than $2.4 billion. In the first quarter of this year, the export revenue of Vinamilk achieved a growth of 8 percent over the same period.

Acknowledging the economic situation in the coming time, many enterprises said that the economic environment in Vietnam is extremely attractive to foreign investors. The wave of foreign investment shift will increase strongly in the coming time. However, related ministries and industries need to select in the direction of reducing investment attraction of fields that domestic enterprises have actively supplied to the market and are operating stably. This helps lessen competition pressure for domestic enterprises not only in the domestic market but also in the export market.

For domestic enterprises, the Government has just issued Decree No.52/2021 on the extension of the time limit for payment of value-added tax, corporate income tax, personal income tax, and land rental in 2021. It is estimated that the total postponed and deferred tax payment is nearly VND115 trillion. This is the right decision of the Government. However, besides this move, the Government should take post-check measures and strictly punish functional organizations and agencies which sluggishly implement policies to support enterprises. Unfortunately, since the beginning of this year, more than 40,000 domestic enterprises have left the market.