FDI in Viet Nam, resilience during challenging time

Last year, the country was described as “a bright star in the COVID-19 dark sky”[2] by the World Bank Lead Economist and Program Leader for Viet Nam, Jacques Morisset. It was proven by a GDP growth rate of 2.9 per cent in 2020, a level that only few countries in the world could have achieved during this dark time of global recession due to the pandemic.

As of April 27^th 2021, Viet Nam had only reported 2,857 confirmed cases and 35 COVID-19-related deaths[3]. The Southeast Asian country was heading smoothly to its economic growth target of 6.6 per cent for 2021, with a strong performance of export-oriented manufacturing sectors and a robust recovery in domestic demand.

The Foreign Direct Investment (FDI) also showed bright prospect, as various foreign investors gradually divert their capital and resources towards Viet Nam to diversify the supply chain. In the first quarter of 2021, the country recorded a FDI of US$10.13 billion[4], representing a year-on-year raise of 18.5 per cent. Investors have poured money into 17 fields and sectors, manufacturing and processing in the lead with an investment capital of nearly US$5 billion, accounting for 49.6 per cent of total registered capital.

"While countries continue to struggle with the impact of COVID-19, Viet Nam has ensured that companies here can continue their operations as close to normal as possible" stated EuroCham Viet Nam Chairman, Alain Cany, on the Business Climate Index (BCI) for the first Quarter of 2021 released by the Chamber[5].Positive signs came after Viet Nam recorded a strong economic growth in the first quarter of 2021 as its GDP hit 4.48 per cent, according to the General Statistic Office[6].

Delta variant challenge

Up until the end of April this year, no one could imagine the damage to be caused by the Delta variant to Viet Nam, the example of a remarkable success story in handling the COVID-19 pandemic in the Asia-pacific region. From the beginning of the COVID-19 fourth wave to September 14th 2021, 630,661 infections and 15,936 deaths have been recorded in the country[7]. Viet Nam has partially shut down industrial zones, factories and imposed strict measures to combat the rising wave of COVID-19.

At least 20,000 workers across industrial parks have left Ho Chi Minh city for their hometowns, in order to be with their loved one to avoid the risk of contamination, according to an estimation by the Ho Chi Minh City Export Processing and Industrial Zones Authority Business Association. The Association also said that tens of thousands of workers were stranded in neighboring provinces of Dong Nai, Binh Duong and Long An and cannot return to work in the city due to restrictions in mobility.

In July, retail sales fell by 19.8 per cent year-over-year, the largest drop since April 2020[8]. Nikkei Asia ranked Viet Nam in 120th place tied with Thailand, on its COVID-19 Recovery Index published in September 3^rd 2021[9].

Viet Nam will not fail FDI enterprises

There have been moments when international media and investors questioned the result of the battle against the pandemic led by the Vietnamese Government, as the Delta variant is causing havoc in Ho Chi Minh City, disrupting business and supply chains of global brands.

However, there are clear signs of a blue sky on the horizon for FDI enterprises in Viet Nam, following these cloudy days. As Vietnamese Prime Minister Pham Minh Chinh said: “The fight against the disease is considered the most important and urgent task, placing the protection of the health and life of the people above all else”[10]. The Government is making all efforts to contain and curb the pandemic, considering vaccination as a necessary component in the path towards achieving herd immunity so as to be able to soon reopen the economy. Therefore, the Government is now accelerating its free-for-all vaccination campaign, with priority given to workers at industrial parks, processing and hi-tech zones and foreign businesses. According to statistics provided by the Ho Chi Minh City Labor Confederation, more than 519,000 workers from 3,458 enterprises have received COVID-19 vaccine[11]. Beside the vaccination campaign, the Government also made the decision of developing domestic vaccines, with Nano Covax being announced as the first COVID-19 vaccine to be approved by the Ministry of Health to conduct clinical trial in the country. Phase 1 of the clinical trial started on December 2020[12], and is expected to reach the market in 2021[13] as announced by the developer, Nanogen Pharmaceutical Biotechnology Co Ltd.

In addition, it seems that southern industrial zones may have crossed the peak of the pandemic. According to the National Steering Committee for COVID-19 Prevention and Control, the number of community infection has declined in some epicenters, including Binh Duong (27 per cent), meanwhile daily deaths has also fallen in Ho Chi Minh City (30 per cent), Dong Nai (50 per cent) and Long An (30 per cent)[14].

The Government showed its determination to put the pandemic under control and support businesses, especially FDI-related ones, by setting up a special working group to listen carefully to the business circle with the goal to identify how to better assist and advise businesses to overcome hardship posed by COVID-19 fourth wave.  It also issued Resolution No.105 to support enterprises, co-operatives and household businesses during the pandemic. The Resolution requires drastic and practical actions from Ministries and Sectors to create the most favorable conditions for loca and international enterprises to recover, maintain and develop production and business.

During a Cabinet meeting in early September, the Government started discussing the roadmap for a post-pandemic plan for economic recovery under new condition, that will include specific and concrete measures for FDI enterprises. The Ministry of Culture, Sports and Tourism has just launched a plan to implement policies to stimulate demand and restore tourism and travel activities in late 2021 and early 2022. It includes a specific and feasible plan to initiate a pilot program for reopening Phu Quoc island to foreign tourists. When the pilot program shows encouraging results, tourists with vaccination certificates will be able to travel to a number of selected destinations, namely Halong (Quang Ninh), Hoi An (Quang Nam), Nha Trang (Khanh Hoa), and Dalat (Lam Dong)[15]. The prospect of international travelers and investors coming back to Viet Nam is quite visible.

Viet Nam’s commitment for success of FDI companies and foreign investors can be seen through the Government’s efforts to improve the investment climate over the last few years. Meetings and dialogues are frequently held between the Government and the private sector, including foreign investors, providing them with the opportunity to make themselves heard on important legislative issues related to foreign investment. The Government also conducts meetings with international partners to maintain close political and economic contact to exchange ideas for a vivid post-pandemic picture.

Adam Sitkoff, Executive Director of the American Chamber of Commerce in Viet Nam stated in an online interview with Bloomberg[16] that “even with the supply chain and shutdown problems they have because of Covid right now, Viet Nam is still going to do very well economically and it is becoming, every day, a more important piece of the global supply chain”.