Foreign investment continues to flow into VN

Foreign investment continues to flow into Viet Nam

According to a report by the global economic research agency under The Economist Intelligence Unit (UK), one of the factors that make Viet Nam appealing in the eyes of foreign investors is that the country’s growth accelerated to 4.5% in the last quarter of 2020, resulting in an annual growth rate of 2.9%, making it one of the fastest growing economies in the world.

In addition, stable industrial production and retail sales firmly expanding at a rate near pre-pandemic levels also contribute, together with the benefits from the new-generation free trade agreements (FTAs) that Viet Nam has signed, which are considered a source of motivation attracting foreign companies to establish high-tech manufacturing factories in the country. 

The World Bank pointed out that after the State Bank of Viet Nam cut benchmark interest rates in October, Viet Nam still maintained credit growth, albeit at a slight rate, concluding 2020 with 10.1%.

The auction and allocation of land use rights and land leases worked to improve state budget revenue in Q4 2020, while ample liquidity continued to reduce government borrowing costs.

Despite the impact of the COVID-19, Viet Nam attracted US$28.5 billion of foreign direct investment (FDI) last year.

Chief Representative of the Japan External Trade Organization (JETRO) in Ha Noi Takeo Nakajima assessed that although Viet Nam’s FDI inflows in 2020 were equal to only 75% of the 2019 figure, it was a very high level compared to many countries in the region and the world.

Especially, with the effective control of the pandemic at present, FDI flows from global supply chains will strongly shift to Viet Nam in 2021.

Selective attraction

According to the JETRO official, Viet Nam not only has a safe and stable investment environment but its domestic market room is attractive as well. Panasonic’s investment shift is a testament to this.

The Panasonic spokesperson said that the company decided to close its factory in Thailand and move production to set up another in Viet Nam from the beginning of 2020.

At the same time, the investment incentives that the Government has applied in recent times have given Viet Nam many production advantages.

For example, high-tech enterprises are exempt from import taxes on raw materials, supplies and components that cannot be domestically manufactured within five years from the commencement of production.

They are also subject to duty exemption for goods imported for processing as well as for the creation of fixed assets regarding projects in the encouraged sectors and those in the areas with difficult socio-economic conditions.

By Vien Nhu