Vietnam becomes more attractive to foreign investors

Many investors said that Vietnam has been still strengthening its position as one of the more and more attractive investment destinations, being the first choice for foreign enterprises, especially those who are seeking to diversify their investment portfolios outside of China.
According to the latest survey data, the rate of foreign direct investment (FDI) enterprises reporting losses increased from 34.3 percent in 2019 to 47.1 percent in 2020 - the highest level in history. The median revenue of FDI enterprises declined from US$0.93 million in 2019 to only $0.67 million - the lowest level since 2012. The proportion of enterprises planning to expand production and business also decreased from 53 percent in 2019 to 41 percent in 2020.

The data on the FDI enterprise “thermometers” surveyed by the Vietnam Chamber of Commerce and Industry are clear evidence of the negative impacts of the Covid-19 pandemic on business performance and efficiency of enterprises. The FDI sector has mainly encountered difficulties involving access to international markets (50 percent), the decline in cash flow (42 percent), and the disruption of supply chains (42 percent). Enterprises operating in the information, communication, and computer production, electronic devices, motor vehicles, leather goods, and garment industries were most affected in terms of revenue and labor.

However, it seems that the current difficulties are temporary. The political stability of Vietnam continues to have a strong attraction to them (over 90 percent). After the Land Law 2013 was enacted, the proportion of FDI enterprises that assess the risk of site acquisition as "low" increased from 64 percent to 80 percent. The proportion of FDI enterprises that believe that Vietnam has a lower risk of policy instability also rose from 60 percent in 2013 to 82 percent in 2020.

In the eyes of foreign investors, Vietnam also has some other important advantages, with nearly 40 percent of FDI enterprises considering anti-corruption as one of the strengths of Vietnam in 2020 from approximately 30 percent in 2014; the proportion of FDI enterprises having to pay unofficial fees while implementing land procedures, inspections, investigations, and import and export procedures all decreased over time; the proportion of FDI enterprises having to spend 10 percent or more of their revenue to pay the unofficial expenses decreased from more than 2 percent in the years of 2016 and 2017 to 1.2 percent in 2020; the quality of public services had also improved significantly, with satisfaction climbing from the 29 percent in 2014 to nearly 46 percent in 2020.

However, noticeably, in the field of system of procedures and regulations and infrastructure, there have not been significant improvements in recent years. According to FDI enterprises, Vietnam needs to continue to improve more drastically. The proportion of FDI enterprises encountering difficulties with administrative procedures in the fields of customs, taxation, fire safety, business establishment, and social insurance remained quite high, around 23-24 percent.

Besides, Vietnam needs to continue to simplify the process of business establishment, digitization, and administrative procedures in the fields of customs, taxation, and social insurance, thereby improving further the national competitiveness and comparative advantage with other countries in the region.

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