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China-US trade war may divert FDI flows to VN

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The trade war is driving to FDI (foreign direct investment) flow to other countries, including Vietnam, which will, nevertheless, have to compete fiercely with others to attract the capital. 

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FDI to increase thanks to trade war

Minister of Planning and Investment Nguyen Chi Dung said the new internal and international economic conditions will bring new opportunities and challenges to Vietnam in attracting and using FDI in the upcoming period.

“The US-China trade war may divert investment flow from the US, EU and China into other countries, including Vietnam,” Dung said at a conference reviewing FDI attraction in the last 30 years in early October.

At the event, Nicolas Audier from Eurocham, commenting about the global trade  situation, said barriers and taxation are more common now. The US and China are imposing billions of dollar worth of tax on thousands of products, from machine components to food.

However, protectionism has had a negative impact on businesses and consumers. It increases the trading costs and prices of goods and services.

To attract more FDI in the future, Vietnam needs to take full advantage of the trade liberalization and market opening. 

The next-generation FTAs will clear the way for Vietnam to go further. The FTA between Vietnam and the EU, expected to be signed in 2019, for example, would help boost Vietnam-EU trade and attract FDI from European countries.

However, it will be not easy to attract FDI in the time to come, especially in the context of the 4.0 industrial revolution in which automation will replace many manual workers. 

Meanwhile, the cheap labor force is a big advantage when calling for capital.

Kitagawa Hironobu from Jetro said one of the biggest problems Japanese enterprises meet in Vietnam is the low localization ratio of products. 

A survey of the organization found that locally made content in the manufacturing sector is 33 percent, lower than the 67 percent in China and 57 percent in Thailand.

This explains why Vietnam’s enterprises heavily rely on material imports from China, Thailand and some neighboring countries. 

Vietnam to attract new-generation FDI

According to Huynh The Du from Fulbright University, in order to attract high-quality FDI, Vietnam needs to prepare the workforce well by building up an education system, especially tertiary education.

Chair of Korcham Ryu Hang Ha also said that human resources development is an important thing to be done. Even if foreign investors are willing to transfer technology, Vietnam would not be able to receive if it does not have engineers qualified enough to master the technology.


Source: VNN

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