Appropriate responses needed to attract foreign capital

According to the United Nations Conference on Trade and Development, foreign investment inflows in 2023 are forecast to be flat or decrease due to many factors. However, according to Assoc. Prof., Dr. Nguyen Mai - Chairman of the Vietnam Association of Foreign-Invested Enterprises (VAFIE), there are two important factors that make FDI inflows to slow down in 2023. Firstly, Vietnam’s major investment partners, such as the Republic of Korea, Japan, and the EU... are developing strategies to limit investment in foreign countries.

Production at Orion Food Vina Co., Ltd. in Binh Duong Province

Therefore, if Vietnam does not have an appropriate response, it will face difficulties in attracting investment, especially the orientation to attract FDI according to Resolution 50 of the Politburo on attracting high quality and high technology investment projects.

The second factor affecting this year FDI inflows is the trend of investor selection in many countries worldwide. Therefore, the reception of investment from investment “importing” countries, as well as the shift of investment capital flows of the investment “exporting” countries have also set higher standards than those of the previous periods. Some countries such as the EU and Japan do not encourage domestic enterprises to invest in energy development or high-tech projects abroad, while some investment receiving countries need such projects.

Another challenge affecting FDI inflows in 2023 is that apart from China, two other countries in Asia: India and Indonesia are also emerging to compete directly with Vietnam in attracting investment.

India is a country that has high quality but cheaper human resources than Vietnam. Currently, the average salary of Indian workers is only 60 percent of that of Vietnamese workers. In addition, India has also offered attractive policies for foreign investment, especially corporations in the world’s top 500. Meanwhile, in ASEAN, Indonesia is also offering preferential policies to increase competitiveness in attracting foreign investment.

In addition to the factors that hinder investment, economic experts also say that the global minimum tax is expected to be implemented in 2024, which could possibly affect foreign investment plans of large corporations. Furthermore, although Vietnam’s investment attraction policies have been improved, there are still many limitations in this area.

In order to increase the attractiveness in FDI attraction, Deputy Minister of Planning and Investment Do Thanh Trung said that in addition to introducing policies to reduce impacts of the global minimum tax, in the coming time, Vietnam will focus on some key solutions, including improving the internal capacity and taking advantage of competitive advantages to enhance the efficiency of foreign investment attraction, closely connecting the domestic investment with the foreign investment sector, and bringing sustainable development to the Vietnamese economy.