Trends in fdi attraction globally and policy orientations to 2030 for vietnam

Nội dung text: Trends in fdi attraction globally and policy orientations to 2030 for vietnam

1. TRENDS IN FDI ATTRACTION GLOBALLY AND POLICY ORIENTATIONS TO 2030 FOR VIETNAM Assoc.Prof.Dr. Bui Xuan Nhan , MA. Le Nhu Quynh1 Abstract: The current trend of attracting FDI is witnessing a massive change with the sharp decline of the total global FDI, the shift of FDI flows, the change in international investment methods, and fierce competition in attracting capital To catch up with these trends, Vietnam needs to change the capital-attraction strategy to enhance the FDI efficiency in the new context. It is also in line with Vietnam’s FDI strategy, which is shifting from “attraction by all means” to “selective attraction,” from “passive attraction” to “active attraction,” and, from “attraction based on financial performance and project size” to “attraction based on economic - social - environmental performance.” The article will analyze worldwide trends in attracting FDI based on studying the current status of FDI attraction in Vietnam. The author also offers some policy orientations for attracting FDI in Vietnam by 2030. Keywords: FDI attraction, policy, orientation, trend, Vietnam 1. INTRODUCTION The trend of attracting FDI in recent years is changing with the sharp decline of FDI. Along with the pressure of decreasing investment capital, there are significant challenges in attracting FDI of countries, like the reversal of globalization, new policies of major economies, economic collisions between countries, or challenges from the impacts of the Fourth Industrial Revolution. Faced with changes in the context and trend of attracting FDI globally, our Party and State have affirmed that calling for foreign investors, applying high technology, and creating high added value to Vietnam’s economy are new goals in attracting FDI currently (Ministry of Planning and Investment, 2018). Resolution No. 50-NQ/TW of the Politburo (2019) guided to build and perfect institutions and policies on FDI in line with development trends, approach advanced national standards, and harmonize with international commitments, ensuring synchronization, consistency, publicity, transparency, and high competitiveness. Therefore, studying the trend of attracting FDI and providing solutions to attract foreign direct investment by 2030 to receive redirected FDI flows is completely consistent with the views and goals of the Government, State and is an urgent requirement of Vietnam currently. 2. LITERATURE REVIEW AND METHODS 2.1. Literature review Topics related to FDI are abundant in different research. In which, some of them focus on assessing the impact of FDI and proposing solutions to enhance the positive effects of 1 Thuongmai University; Email: bxnhan@tmu.edu.vn 107
2. 108 KỶ YẾU HỘI THẢO KHOA HỌC QUỐC TẾ FDI TOÀN CẦU VÀ ỨNG BIẾN CỦA DOANH NGHIỆP FDI TẠI VIỆT NAM TRONG BỐI CẢNH MỚI FDI on socio-economic aspects such as economic growth, export, employment, poverty, etc. Regarding the impact of FDI and economic growth, in empirical studies, so far, the relationship between economic growth and FDI still has mixed conclusions. On the one hand, many studies have shown the positive impact of FDI on economic growth of the host country such as Borensztein (1998) in How does FDI affect economic growth, Nguyen Mai (2004) in Chính sách thu hút đầu tư nước ngoài FDI của Việt Nam: Thành quả và việc hoàn thiện chính sách, Nguyen Thị Phuong Hoa (2004) in Foreign Direct Investment and its Contributions to Economic Growth and Poverty Reduction in Vietnam (1986-2001), On the other hand, some studies such as Herman et al. (2004), OECD (2001), Seldon & Song (1994) supposes that FDI has a negative impact on economic growth. In addition, another stream of views supposes that this relationship depends on the absorptive capacity of the host country and often changes over different periods such as Borensztein (1998), Hermes & Lensink (2003), Alfar (2004) In addition, other relationships of FDI are also studied by the authors in this study such as Judith M. Dean, Mary E. Lovely và Hua Wang (2004) in Foreign Direct Investment and Pollution Havens: Evaluating the Evidence from China, Pham Thi Phuong Loan (2011) in FDI tác động như thế nào đến thu nhập và phát triển con người tại Việt Nam. Some authors mentioned policies to attract FDI but did not study on a national scale but in a specific locality and province such as: Ngo Tran Xuat (2018) in Thu hút đầu tư trực tiếp nước ngoài tại vùng kinh tế trọng điểm miền Trung trong bối cảnh hội nhập kinh tế quốc tế; Dang Vinh (2018) in Đẩy mạnh thu hút vốn đầu tư nước ngoài tại thành phố Đà Nẵng; Vũ Việt Ninh (2018) in Tăng cường thu hút vốn đầu tư trực tiếp nước ngoài vào nông nghiệp vùng Đồng bằng sông Hồng của Assessments of FDI attraction activities and policies to attract FDI are analyzed in connection with the specific characteristics of each locality, so many assessments and recommendations are not suitable for the overall situation. localities throughout the country. Some authors study the trend of attracting FDI but most of them are mainly carried out many years ago, when the international and domestic contexts were much different from today, so solutions and recommendations for attracting Vietnam’s FDI capital is no longer relevant. They are Chukwuogor, Chiaku (2003) in Recent Trends in Global FDI Flows: Implications for the 21st Century; Maiko Miyake and Magdolna Sass (2000) in Recent Trends in Foreign Direct Investment; Simon J. Evenett, Johannes Fritz (2021) in Advancing sustainable development with FDI: Why policy must be reset Therefore, it is very necessary to study the trend of attracting FDI in the new context, thereby proposing orientations and policy solutions for attracting FDI in Vietnam. 2.2. Methods - Data collection methods The article mainly uses secondary data in analyzing the trend of attracting foreign investment capital; orientations and solutions to attract Vietnam’s FDI in the new context. Secondary data collection was carried out at desks (via internet), at the Library of the University of Commerce, the National Library, the library of the Ho Chi Minh National Academy of Politics, The data is collected from available sources such as: the database of the Ministry of Planning and Investment, the General Statistics Office, the General Department of
3. INTERNATIONAL CONFERENCE PROCEEDINGS: GLOBAL FDI AND RESPONSES OF FDI ENTERPRISES IN VIETNAM IN THE NEW CONTEXT 109 Customs; reports of the Vietnam Chamber of Commerce and Industry (VCCI), organizations such as the World Bank (WB), UNCTAD, the International Monetary Fund (IMF), the World Trade Organization (WTO) ; Newspapers/electronic journals/scientific proceedings related to attracting FDI and other reliable sources. Collected data related to FDI attraction trends in the world and in Vietnam; solutions have been proposed by the authors to attract FDI in Vietnam. - Data analysis methods The basic data analysis methods used in the article are a qualitative method through analysis, theory synthesis, comparison, contrast The comparison and contrast method are mainly used in analyzing the trend of attracting FDI in the world between years, from which we can see the difference in the size, quality, form and destination of FDI. Analytical and synthetic methods are used to assess the status of Vietnam’s FDI attraction and provide orientations to attract capital from Vietnam to 2030. 3. RESULTS AND DISCUSSION 3.1. Global trend of attracting foreign direct investment a) The downward trend of total foreign direct investment Over the last ten years, global FDI flows have fluctuated dramatically. It climbed from 1.330 billion USD in 2010 to a record peak of 1,920 billion USD in 2015. Then, it declined significantly in the following years, from 1,870 billion USD in 2016 to 1,497 billion USD in 2017. 2018 was the third consecutive year when FDI flows declined (by 1,297 billion USD and down by 13% compared to 2017). In which capital flows to developed countries decreased by 27.0%, hitting 557 billion USD. By 2019, FDI to developed countries has recovered as the effect of the United States tax reform winds down. However, global FDI did not show an upward trend. In 2020, the global FDI was 859 billion USD, decreasing by 42% from the previous year. It was the lowest since the 1990s, and it was 30% lower than the global financial crisis of 2008-2009 (Figure 1). Figure 1. FDI inflow: global and by group of economies, 2007-2020 Unit: Billions of US dollars Source: UNCTAD (2021) The drop in FDI is not evenly distributed among nations, regions, or economic groups. FDI inflows to developing countries fell by around 12% to 616 billion USD. However, China topped the list of countries receiving the most FDI. Its FDI flows increased by 4% to 163 billion
4. 110 KỶ YẾU HỘI THẢO KHOA HỌC QUỐC TẾ FDI TOÀN CẦU VÀ ỨNG BIẾN CỦA DOANH NGHIỆP FDI TẠI VIỆT NAM TRONG BỐI CẢNH MỚI USD, making it be the world’s largest recipient of FDI in 2020. In developed countries, total FDI was estimated at 229 billion USD, falling by 69% compared to the same period last year and being the lowest in the past 25 years. FDI flows in the euro area had been wholly exhausted because it was at -4 billion USD, falling by 101.2% compared to 2019 (UNCTAD, 2021). Some countries have witnessed record low FDI, such as the Netherlands (reaching -150 billion USD) and Switzerland (gaining-88 billion USD). In 2020, FDI in the EU27 was estimated at 110 billion USD, declining by 70.5% compared to the previous year. Accordingly, FDI flows of 17 member countries decreased, in which Germany and France fell the most. Precisely, FDI of Germany and France was estimated at respectively 23 billion USD, and 21 billion USD, dropping to 60.3% and 39% compared to the last year. FDI flows to developing countries declined by 12% to 616 billion USD compared to 2019. The Asian developing countries had an FDI of 476 billion USD, which declined by 4% over the past year. Latin America and the Caribbean recorded a 37% drop in FDI, falling to an estimated 101 billion USD. The African region witnessed a decrease of 18% in FDI, falling to 38 billion USD, and FDI to transition economies declined by 77% to 13 billion USD compared to the previous year. (See Figure 2). The United Nations Conference on Trade and Development (UNCTAD) says that FDI is projected to decrease by a further 5% to 10% in 2021 and to initiate a recovery in 2022 with FDI reverting to the pre-COVID underlying trend. The outlook is highly uncertain. Prospects depend on the duration of the health crisis and the effectiveness of policies mitigating the pandemic’s economic effects. Figure 2. FDI inflows by region, 2019 and 2020 (Unit: Billions of US dollars) Source: UNCTAD (2021) The above drop is due to a variety of factors, of which there are two main reasons as follows: Firstly, it is a decrease in FDI from developed countries’ policies regarding geopolitical fluctuations. Political tensions in the world have been rising complicatedly since 2019, affecting the economic situation of some countries and critical fields. Trade tensions between the United
5. INTERNATIONAL CONFERENCE PROCEEDINGS: GLOBAL FDI AND RESPONSES OF FDI ENTERPRISES IN VIETNAM IN THE NEW CONTEXT 111 States and China and geopolitical issues have significantly increased the instability of the global trading system, considerably influencing business confidence, investment decisions, and global trade. The UK’s departure from the EU (Brexit) and political instability in Hong Kong negatively affected the economic prospects of the UK and Hong Kong. In contrast, the US-Iran tensions affected the oil price in the world. In addition, several other geopolitical tensions, such as the political crisis in Hong Kong, tensions in the East Sea, and US-North Korea tensions, also impacted the global economy, trade, and FDI attraction of nations worldwide. Due to these developments, the developed countries such as the US, Japan, and Europe adopted policies encouraging their companies to bring FDI back to their home country to mitigate risks and protect domestic production (UNCTAD, 2020). At the same time, many of the world’s large economies realized that they couldn’t depend on one market. They shall diversify their supply chains to limit risks and increase investment efficiency. Secondly, it is due to the massive impact of the COVID-19 pandemic. The COVID-19 pandemic, which caused a sharp decline in global FDI, negatively affected the psychology of economic agents. It made foreign investors form a psychological state of delaying consumption and investment (this phenomenon was demonstrated during the 2007-2009 economic recession). Furthermore, the current economic crisis and the socio- political instability caused by COVID-19 made investors in these nations apprehensive and challenging to make investment decisions. Finding out investment prospects of potential investors via analyzing investment opportunities, seminars, business forums, investment promotion forums is likely to be delayed. Due to a lack of raw materials and components that had not been cleared, and the lack of human resources due to the pandemic, FDI enterprises operated moderately or stopped production, severely affecting production progress and orders. At the same time, implementing anti-COVID-19 measures such as isolation and social distancing have caused a sharp decrease in labor supply, especially in areas requiring direct labor during the manufacturing process. These factors have hindered the progress, preparation, and implementation of FDI projects globally. b) Shifting trend of foreign direct investment flows The wave of foreign direct investment movement has appeared for many years due to the trend of protectionism. The economic crisis has made many countries encourage businesses to move the capital back to their home country to solve job problems. The impact of the US- China trade war and the disruption of the global supply chain due to the COVID-19 pandemic is currently acting as a catalyst, speeding up the process of moving FDI out of China (Tong Qi, 2019). There are three trends of global FDI inflow shifting: order shifting, the transfer of parent company’s capital, and factory shifting, which means the direct shifting of a part of the whole factory from one country to another. In which, the movement of factories is the most difficult. It is not easy to move a factory from one place to another because it takes much time to dissolve an enterprise and implement its procedures. Moreover, in the context of global investment activities having been almost paralyzed due to COVID-19, investment promotion activities of multinational corporations are challenging to implement. The shifting of orders is often easier to implement. This trend can happen soon and rapidly, so investment-receiving countries should prepare all relevant conditions to receive and gradually master the technology.
6. 112 KỶ YẾU HỘI THẢO KHOA HỌC QUỐC TẾ FDI TOÀN CẦU VÀ ỨNG BIẾN CỦA DOANH NGHIỆP FDI TẠI VIỆT NAM TRONG BỐI CẢNH MỚI There have been many signs of FDI moving out of the Chinese market in recent years. According to Consulting firm A.T. Kearney (2019), China relegated from third (in 2017) to seventh (2019) among the world’s best FDI destinations (this was the lowest level ever), demonstrating the decline of China’s attractiveness for investors. According to Nomura Group (2019), between the beginning of 2018 and August 2019, 56 international enterprises left China to operate in other countries. 26 enterprises moved to Vietnam. 11 enterprises moved to Taiwan. 11 enterprises moved to Thailand, and three enterprises moved to India. According to results released by Bank of America in 2020, about 67% of companies participating in the survey believed that “companies’ moving supply chains from China to their homelands or other markets will change the most dramatically in the post-COVID-19 era.” The trend of shifting production chains out of China is due to some reasons such as: (i) The escalating trade and technology tension between the US and China makes investors tend to look for a more stable and less risky (export-oriented) manufacturing investment place that isn’t imposed tariffs by the US; (ii) The COVID-19 pandemic has disrupted the global production and supply chain, showing its extensive dependence on China. It makes many Transnational Corporations “rethink” their global trade and investment strategies in the direction of diversifying supply to reduce risks; (iii) China is losing its advantages in attracting FDI due to rising labor costs and eliminating investment promotion policies. Wages in manufacturing in China increased to 3.9 USD/hour in 2016 from 2.0 USD/hour in 2010. The cost of industrial real estate in China has also risen dramatically as the economy and living standards have improved. As a result, foreign investors have looked for more cost-effective investment areas as a cost-cutting option. China is moving up the value chain and reforming the economy to increase domestic consumption after a long time with a high growth rate of over 8%. This country focuses on developing services and exporting higher-value items. These things have re-directed foreign investment flows towards industries based on labor, land, and other factors (UNCTAD, 2021) In reality, FDI to China climbed by 4% in 2020, reaching 163 billion USD, helping China overtake the United States in the list of nations receiving the most FDI. It proved to many previous comments of economic experts who said that FDI flows out of China would be challenging to realize in a short time. The shifting process does not happen immediately. It takes about 2 to 5 years because global supply chains have been completed. Production networks and supply chains in China are highly interconnected, interdependent, and even “inseparable.” Therefore, if shifting production and supply chains, investors must pay enormous opportunity costs. FDI flows will not immediately move out of China but are restructuring in the direction of “China + 1”, which means that this shift is market diversification. It only moves a part of the supply chain due to some following reasons. Firstly, China is still a huge market and an essential destination due to its stable political system, abundant and high-quality human resources, and skilled workers. Secondly, it has low tariffs, a practical integrated logistics system with global supply chains, and good infrastructure and supporting industries. Finally, the large scale of production and the high-tech ecosystem meet the quality standards of the US and Europe. In addition, China quickly created “policy responses” to attract foreign investors. For example, they announced the Foreign Investment Law in August 2020, which included incentives for electronic industries, particularly chip
7. INTERNATIONAL CONFERENCE PROCEEDINGS: GLOBAL FDI AND RESPONSES OF FDI ENTERPRISES IN VIETNAM IN THE NEW CONTEXT 113 manufacturing industries, to exempt and reduce corporate income tax for up to ten years. As a result, the FDI flows out of the Chinese market tend to slow down in the future. c) The trend of changing the form of foreign direct investment globally Traditional forms of investment are shifting to new forms of FDI to achieve better efficiency due to the outstanding advantage of developing global value chains. Global foreign investment is increasingly transforming investment methods through value chains. In the past, multinational corporations invested across borders through direct ownership of overseas facilities in the host country or free trade. In recent years, this trend has gradually changed. Multinational corporations are turning to new modes of foreign direct investment (FDI) or accessing foreign markets with more modern investment forms, such as manufacturing and services lease, agricultural contracts, franchising, and contractual management to seek better business results. Alternative forms of establishing a physical presence in the country, such as through efficiency-seeking FDI or conventional market-seeking, are collectively known as cross-border FDI without capital contribution or new forms of investment (NFI). This approach allows multinational corporations to coordinate activities in the global value chain by supporting domestic suppliers, strengthening the linkage among Vietnamese suppliers in the value chain. With the new form, investments will be made through trade contract mechanisms between foreign investors and domestic enterprises. Investments are often used for brands, intellectual property rights, business know-how, technologies, skills, or business processes. International experts predict that the new form of investment will quickly become a trend in Vietnam, which aims to attract “new-generation” FDI. According to economic experts, the form of investment without the capital contribution and with capital contribution will not be mutually exclusive. Multinational corporations initially enter the host country’s market in the form of no capital contribution. However, after that, they can decide to invest directly through full or partial ownership by setting up overseas subsidiaries or joint ventures. d) The competition in attracting foreign direct investment (FDI) is getting even more fierce Competition in attracting foreign investment is taking place increasingly fiercely among countries in the region and the world. It is inherently global and unequal because the advantage belongs to developed countries which account for three-quarters of total global FDI. The remaining one-quarter of FDI is for more than 100 developing countries in the world. In addition to the scarcity caused by the dramatic fall in FDI in recent years, the level of competition among developing nations is becoming increasingly fierce for the following reasons: Firstly, developing countries have been transitioning to a market economy, opening up and integrating into the international economy, so the need for capital for development is enormous. Attracting FDI has become a vital issue of countries in the process of socio- economic development. Secondly, many of the world’s major economies realize that they cannot depend on one market. It’s time for them to diversify the supply chain to limit risks and increase investment efficiency. Therefore, the US, Japan, and Europe have launched policies to
8. 114 KỶ YẾU HỘI THẢO KHOA HỌC QUỐC TẾ FDI TOÀN CẦU VÀ ỨNG BIẾN CỦA DOANH NGHIỆP FDI TẠI VIỆT NAM TRONG BỐI CẢNH MỚI call for businesses to invest in their native countries or move to other countries. Thailand, Indonesia, and India also immediately announce policies toward attracting investment. The most notable thing is that India has provided financial support to smartphone manufacturers. The competition is more intense and fiercer because China is looking for ways to retain foreign investors with preferential policies on exempting and reducing long-term corporate income tax. Lastly, except for some oil countries, most developing countries attract FDI based on similar advantages such as abundant labor resources with cheap labor costs, products mainly derived from agriculture, and available resources Therefore, there is a wide array of choices about investment locations and countries for foreign investors. If they want to increase the competitiveness in attracting FDI, they need to create a more attractive investment environment. e) The trend of attracting foreign direct investment based on cheap labor is losing its advantage Industry 4.0 has brought a series of technological breakthroughs that have made significant changes, such as: (i) Creating business models that do not require much capital to purchase and own the systems of machinery, buildings, and factories as before;(ii) Cutting business costs, improving productivity by optimizing input factors and cost of maintenance systems, reducing production errors, and meeting customers’ needs better; and (iii) Providing opportunities for enterprises to develop new products and services. The Fourth Industrial Revolution (or Industry 4.0) also affects the arrangement of production and labor. Industry 4.0 will significantly influence all laws, economies, and sectors due to its capacity to generate the replacement of human labor with new technology and robotics (Nguyen Mai, 2020). Accordingly, the low cost of labor will no longer be appreciated and gradually lose the advantage in creating FDI attraction. If a country has a favorable environment and suitable skills and technology for Industry 4.0, it will have an advantage in attracting FDI in the more value-added export-oriented group. Besides the slowing down of global investment flows and the new investment trend in technology projects in China, FDI inflows into Vietnam after the economic crisis tended to slow down and decline in the last two years. Therefore, it is necessary to have a new strategy for attracting FDI, especially investment projects in the technology sector, to maintain and increase FDI inflows into Vietnam. 3.2. The current situation of attracting foreign direct investment in Vietnam Foreign direct investment plays a vital role in Vietnam’s socio-economic development. Between 2016 and 2019, the average realized FDI accounted for over 23% of the total realized investment capital of the entire society. The average GDP of the FDI sector reached 19.8% of the total GDP of the entire economy, attracting nearly 5 million workers. It brought the highest profits because of gaining over 42% of the entire corporate sector. By 2020, the total newly registered, adjusted, and contributed capital and purchased shares of foreign investors reached 28.53 billion USD, equaling 75% compared to the same period in 2019. Specifically, the disbursement of foreign direct investment capital was estimated at 19.98 billion USD, equivalent to 98% over the corresponding period last year. Due to the complicated development of the COVID-19 pandemic, production-business
9. INTERNATIONAL CONFERENCE PROCEEDINGS: GLOBAL FDI AND RESPONSES OF FDI ENTERPRISES IN VIETNAM IN THE NEW CONTEXT 115 activities had been affected, causing the realized investment capital of foreign investment projects in 2020 to decrease compared to 2019 slightly. However, the extent of the reduction has improved. Many foreign-invested enterprises are gradually recovering, maintaining well production and business activities, and expanding projects. The year’s highlight was that adjusted investment capital reached over 6.4 billion USD, representing a year-on-year increase of 10.6%. This year witnessed 1,140 projects register to adjust investment capital, a fall of 17.5% on-year. In addition, the number of newly registered projects hit 2,523, a drop of 35% compared to the same period from last year. Total capital reached 14.65 billion USD, down by 12.5% compared to the same period last year. In 2021, Vietnam’s foreign direct investment inflows are expected to increase again. According to statistics from the Foreign Investment Agency - Ministry of Planning and Investment, FDI into Vietnam increased sharply in the first quarter of 2021. Specifically, as of March 20, the total newly registered, adjusted, and contributed capital and purchased shares of foreign investors reached 10.13 billion USD, increasing 18.5% over the same period in 2020. This increase was pretty substantial because the whole country’s total FDI in 2020 was nearly 29 billion USD. Besides, realized capital of FDI projects was estimated at 4.1 billion USD, increasing by 6.5% compared to the same period. In the first quarter of 2021, the processing and manufacturing sector took the lead with a total investment capital of nearly 5 billion USD, accounting for nearly 50% of the total registered investment capital. Among 56 countries and territories investing in Vietnam in the first quarter, Singapore took the lead with 4.6 billion USD, accounting for 45.6%. In the first quarter of 2021, the transition between the Investment Law 2014 and the Investment Law 2020 affected the new issuance and adjustment of foreign investment projects in Vietnam. Moreover, the COVID-19 pandemic broke out again in many countries, including Vietnam, affecting travel, new investment decisions, and expansion of investors’ projects. As a result, compared to the same period, the number of newly registered projects, adjusted capital, contributed capital and purchased shares of foreign investors continued to decline. However, this level has improved. The quality of FDI inflows has also significantly increased. In the early months of 2021, several significant projects are registered to invest in Vietnam, raising the average value of newly registered capital per project to 30.87 million USD. These projects are mainly in the high-tech sector, including Foxconn’s US$270-million tablet and laptop project in Bac Giang, JA Solar PV Vietnam photovoltaic cell technology project with investment capital of 210 million USD, or LG Display Vietnam Hai Phong’s project with an additional US$750 million investment (Table 1). In general, Vietnam’s efforts to attract foreign direct investment capital have reached many achievements in recent years. However, this activity still has some shortcomings that need to be enhanced. Firstly, high-tech and value-added projects account for a small proportion of FDI. Secondly, the source technology has not yet been attracted. Thirdly, labor- intensive is still large. Finally, the spillover effect from the FDI sector to domestic enterprises is still limited. Therefore, Vietnam shall change its policy orientation to improve the efficiency of FDI attraction under the new context and trends.
10. 116 KỶ YẾU HỘI THẢO KHOA HỌC QUỐC TẾ FDI TOÀN CẦU VÀ ỨNG BIẾN CỦA DOANH NGHIỆP FDI TẠI VIỆT NAM TRONG BỐI CẢNH MỚI Table 1. Foreign direct investment in Vietnam since 2018 to 2020 Unit: Million USD 2018 2019 2020 Realized capital 19,100.00 20,380.00 19,980.00 Total registered capital 35,465.56 38,019.11 28,530.10 Newly registered capital 17,976.17 16,745.60 14,646.42 Number of new projects 3,046 3,883 2,523 Adjusted capital 7,596.65 5,802.03 6,414.49 Number of times of adjusted projects 1,169 1,381 1,140 Capital contribution and share purchase 9,892.73 15,471.48 7,469.20 Number of times of capital contribution to buy shares 6,496 9,842 6,141 Average newly-registered capital/project 5.90 4.31 5.81 Source: Foreign Investment Agency – Ministry of Planning and Investment (2021) 4. CONCLUSIONS AND IMPLICATIONS In line with the global trends in attracting FDI, Vietnam has identified some suggestions to improve the efficiency of attracting Vietnamese capital in the new context by 2030 as follows: Firstly, it is crucial to focus on attracting investment in high-value-added activities, introducing new technologies, extensive R&D activities, and strong spillover effects to help domestic enterprises integrate into global value chains. It is also a catalyst for the development of a new generation of domestic enterprises. We need to give priority to attracting foreign investment in industries and fields of high and advanced technology, environmentally friendly technology, clean energy, renewable energy, manufacturing medical equipment, providing healthcare services, education and training, high-quality tourism, financial services, logistics, and other modern services, high-tech farming, smart agriculture, developing modern technical infrastructure, and new industries based on Industry 4.0 Technology. Secondly, in the beginning, it is necessary to own “first-generation FDI” to maximize the added value of “new-generation FDI.” It is imperative to overcome weaknesses in the value chain and create jobs in many provinces where first-generation FDI is still vital for many following years (Bộ Kế hoạch & Đầu tư, 2018). Vietnam has a large and young population (nearly 100 million people), but the labor force with professional qualifications is less than 20%. More than 700,000 new jobs are produced each year to keep up with the rate of workforce growth. As a result, assembly and manufacturing activities using low-skilled labor (such as apparel or consumer electronics) will continue to provide many jobs, particularly in backward provinces. In addition to prioritizing capital flows from developed countries such as the US, Japan, and the EU (with the potential to bring large-scale projects, modern technology, high added value, etc.), Vietnam shall continue to attract FDI flows from the remaining countries mainly investing in industries taking advantage of cheap labor and focusing on assembly and supporting industries such as Singapore and Malaysia. (However, this capital should be selected carefully and gradually replaced by a high value-added FDI sector). Priority should be given to attract foreign investment projects from large enterprises, but we can evaluate and selectively attract FDI from small and medium-sized businesses to micro and small-scale projects. However, it is crucial
11. INTERNATIONAL CONFERENCE PROCEEDINGS: GLOBAL FDI AND RESPONSES OF FDI ENTERPRISES IN VIETNAM IN THE NEW CONTEXT 117 to create the conditions for upgrading technology, joining the global production network and value chain, developing supporting industries, and gradually shifting from attracting foreign investment based on the low cost of labor to competing based on high-quality resources. Thirdly, we should attract FDI based on the needs of the economy and eliminate the rampant FDI attraction as in the past. We need to study the strategic roadmap to upgrade the economy to proactively develop strategies and policies for attracting investment capital into industries, fields, and localities based on the principle of seizing opportunities, particularly opportunities to access modern technology and connect to the global production network. Attracting FDI requires a strategy for selecting investment capital for each industry, field, and locality and a plan to attract each country with strengths and advantages suitable to the development needs of each industry, field, and locality at each stage of the overall development and economic upgrading strategy. Accordingly, attracting foreign investment in industries in which Vietnam still has advantages such as textiles, garments, leather, and footwear is necessary. However, we still prioritize focusing on creating high added value and associating with intelligent manufacturing and automation. It’s essential to ensure overall economic, social, and environmental performance for the localities and regions that attract foreign investment suitable with the advantages, conditions, development level, and planning of each locality in the regional linkage. The attraction of foreign investment should be carefully evaluated in sensitive regions relating to national defense and security, such as border areas, the sea, islands, and exclusive economic zones. The concerns of national defense, security, and sovereignty must be taken precedence. Fourthly, we should promote active investment based on the requirements of foreign investors, particularly high-quality ones. We will proactively find actual demands of foreign investors, particularly high-quality ones, and concentrate on building and fulfilling the necessary conditions in the investment environment. The most important thing is to ensure that investors have a favorable legal environment and can access international standards, a trained workforce suitable to their demands, and developed technical infrastructure. Besides, we need to strengthen the cohesion and cooperation capacity of domestic enterprises. Fifthly, it is necessary to take full advantage of opportunities via entering successfully the Free trade Agreement (FTA), especially New Generation of Free-Trade Agreements (NGFTAs). Thanks to signing the Regional Comprehensive Economic Partnership (RCEP), the Vietnam - UK Free Trade Agreement (UKVFTA), major FTAs such as the EU-Vietnam Free Trade Agreement (EVFTA), and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), Vietnam has had a great source of opportunities to integrate, deeply participate in the world production network, and select quality FDI projects for reaching a higher level in the global value chain. In the future, Vietnam’s strategies and policies for FDI attraction need to be changed dramatically to seize chances and overcome challenges caused by profound geopolitical and socio-economic fluctuations and implications of the COVID-19 pandemic. To avoid international litigation against FDI enterprises in implementing the New Generation of Free-Trade Agreements, we need to research the appropriate mechanisms and policies (including fiscal policy). Thanks to that, we can limit FDI projects that may cause harm to economic security, energy security, national security, emissions, and environmental pollution.
12. 118 KỶ YẾU HỘI THẢO KHOA HỌC QUỐC TẾ FDI TOÀN CẦU VÀ ỨNG BIẾN CỦA DOANH NGHIỆP FDI TẠI VIỆT NAM TRONG BỐI CẢNH MỚI Sixthly, policies to attract FDI need to be completed in the direction of digital transformation. Decision No.749/QD-TTg on “National digital transformation program to 2025, with orientation to 2030” approved by Prime Minister dated June 3, 2020, has determined that: “By 2030, Vietnam will become a digital, stable, prosperous country, and a pioneer in testing new technologies and models. Vietnam will fundamentally and comprehensively renovate the management and administration activities of the Government, production and business activities of enterprises, the way of living and working of people, and develop a safe, humane, and pervasive digital environment.” The digital economy, digital government, and digital society are the most significant orientations in the Socio-Economic Development Strategy 2021 - 2030 to utilize Vietnamese’s intellectual potential and creative capacity more effectively. We need to actively participate in the Fourth Industrial Revolution and integrate deeply with other countries to narrow the gap and catch up with the development level of developed ones in ASEAN. In that context, policies for attracting FDI need to be perfected in an appropriate way to bring into full play the advantages of the digital economy. Lastly, it is crucial to complete the policy for sustainably attracting FDI, focusing on quality and efficiency of socio-economic development, ensuring national defense and security, and strengthening linkages with domestic enterprises (Simon J. Evenett, Johannes Fritz, 2021). LIST OF REFERENCES 1. Bộ Chính trị (2019), Nghị quyết của Bộ Chính trị về định hướng hoàn thiện thể chế, chính sách, nâng cao chất lượng, hiệu quả hợp tác đầu tư nước ngoài đến năm 2030, Số 50- NQ/TW. 2. Bộ Kế hoạch & Đầu tư (2018), Dự thảo chiến lược và định hướng chiến lược thu hút FDI thế hệ mới, giai đoạn 2018-2030. 3. Cục Đầu tư trực tiếp nước ngoài - Bộ KH&ĐT (2019), Báo cáo tình hình đầu tư trực tiếp nước ngoài năm 2019. 4. Cục Đầu tư trực tiếp nước ngoài - Bộ KH&ĐT (2020), Báo cáo tình hình đầu tư trực tiếp nước ngoài năm 2020. 5. Ninh Thị Hoang Lan (2021), Xu hướng dòng vốn đầu tư trực tiếp nước ngoài sau đại dịch COVID-19 và một số đề xuất cho Việt Nam, Tạp chí Công Thương, Số 6, tháng 3 năm 2021 6. Nguyen Mai (2018), ‘Cách mạng công nghiệp 4.0 với Việt Nam’, baodautu, truy cập lần cuối ngày 28 tháng 9 năm 2018 từ 7. Đinh The Phuc, Đinh Thị Thanh Hai (2020), “Xu thế dịch chuyển đầu tư và gợi ý một số giải pháp cho Việt Nam về tiếp nhận dòng vốn FDI mới sau đại dịch Covid - 19”, Tạp chí Công Thương, Số 16, tháng 7 năm 2020 8. Đảng Cộng sản Việt Nam (2021), Văn kiện Đại hội đại biểu toàn quốc lần thứ XIII, NXB Chính trị quốc gia, Hà Nội. 9. Hồ Đình Bảo (2020), “Chính sách FDI và phát triển bền vững ở Việt Nam”, Kỷ yếu Hội thảo khoa học Quốc gia Định hướng, quan điểm và giải pháp phát triển khu vực FDI trong thực hiện chiến lược phát triển bền vững, đổi mới mô hình tăng trưởng và tái cấu trúc nền kinh tế Việt Nam đến năm 2035. 10. Azim, Mohammad (1999), Foreign Direct Investment: Global Trend and Pattern, VL - 24, Bank Parikrama 11. Chukwuogor, Chiaku (2003), Recent Trends in Global FDI Flows: Implications for the 21st Century, International Journal of Banking and Finance 12. Maiko Miyake and Magdolna Sass (2000), Recent Trends in Foreign Direct Investment, Financial Market Trends, No. 76, June 2000 13. Simon J. Evenett, Johannes Fritz (2021), Advancing sustainable development with FDI: Why policy must be reset
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