FDI strongly pouring into Vietnam to take full use of new generation FTAs

The Vietnam Global Investment Forum was held in Hanoi on Wednesday in Hanoi focusing on economic prospects, FDI trends and state-owned enterprise (SOE) equitisation saw a very positive economic – investment picture of Vietnam in the current period. This timely forum attracted more than 700 delegates representing government officials, business leaders, foreign direct investors, fund managers, industry experts, economists and bankers from many countries in the world.

According to participants, FDI is strongly poured into Vietnam to take full use of new – generation FTAs such as Trans-Pacific Partnership (TPP) and EU-Vietnam FTA (EVFTA). Addressing the opening ceremony, Tony Shale, Euromoney CEO, Asia, said that Vietnam has emerged as an attractive market in Asia. The country obtained an impressive economic growth of 6.28% in the first half of this year.

Prime Minister Nguyen Tan Dung delayed the monthly cabinet meeting from the morning to the afternoon to attend the forum. The government leaders confirmed that the condition of the economy is very favorable with the economic growth reaching the yearly target (at least 6.53% this year and 6.7% for 2016), low inflation (only 1.5-2% for the whole year), local and foreign investors spoke about Vietnam overcoming the crisis and described their business plans for the future.

The discussion about the economic situation in Vietnam attracted attention of the CEO of Indochina Capital, Peter Ryder, who has been in Vietnam for more than 20 years. The interests of foreign investors in Vietnam that described by Ryder at the forum held by Euromoney and the Ministry of Planning & Investment partly helped explain why $17 billion of foreign direct investment had been (FDI) registered in Vietnam in the past nine months, more than half of the same period of 2014.

Along with FDI, the indirect capital flow from foreign investors has improved in recent years. According to Vice President of the State Securities Commission, Nguyen Thanh Long, the listed securities portfolio of foreign investors increased by an average of 20-25% per year. Currently foreign investors account for only 1% of the total trading accounts but the total portfolio value is over $15 billion, accounting for 25% of the transaction value of market.

Chairman of the Saigon Securities Company (SSI) Nguyen Duy Hung said that the current situation of the economy is what investors were dreaming about 10 years ago.

Along with the stable macroeconomic indicators, Hung quoted statistics of the state agencies showing that per capita income (in purchasing power parity) of Vietnam today is over $5,000. This not only helps businesses have more opportunities for selling goods but also provides a basis for Vietnam to gradually reduce ODA funds.

Recently a locality refused to receive ODA. It means that Vietnam will have a chance to get capital which requires greater efficiency, helps businesses improve competitiveness and sustainable development, Hung said.

According to Hung, after a period of fierce competition from other countries in the region such as Indonesia, the Philippines and most recently Myanmar, Vietnam seems to have become an address of priority for investment again. However, to take advantage of the opportunity to once again become the “star in attracting FDI” as it was in the period of 2007-2009, many questions were raised at the forum about Vietnam and its biggest rivals.

Prime Minister Nguyen Tan Dung said that Vietnam’s participation in 8 Free Trade Area agreements (FTAs) in recent years has brought many opportunities for the business community.

Particularly, the ASEAN Economic Community (AEC) has a GDP of about $2,500 billion and may reach $10,000 billion by 2030. If the Trans-Pacific Partnership (TPP) agreement goes through, Vietnam can enjoy many preferential incentives in trade with 55 countries.

However, the PM acknowledged that the achievements in integration and investment attraction of Vietnam are not commensurate with the potential. They are working hard to come up with solutions to overcome challenges and their own limitations.

The Prime Minister stressed that the investment and business environment in Vietnam is still in the process of completion and renovation, especially the stage of implementation. However, he affirmed that Vietnam can achieve the targets of the business environment equivalent to the group of ASEAN 4 in 2016, even in this year.

He called on private and foreign investors to invest in infrastructure in the form of public-private partnership (PPP), and participate in the purchase and equitization of State-owned enterprises.

The Minister of Planning and Investment, Bui Quang Vinhm reaffirmed that Vietnam is pushing stronger integration with the FTA. Thereby, the biggest expectation of the Vietnamese Government and enterprises is to expand the market.

He cited textile-garment as an example, saying that if Vietnam is successful in TPP negotiations, Vietnamese textile-garment firms may enjoy tax rate of 0% in many markets, instead of the current 17-20%.

Minister Vinh also said that it is necessary for Vietnam to overcome its own problems, otherwise many countries that are not their rivals today will certainly be Vietnam’s rivals tomorrow.

Minister Vinh stressed Vietnam has gradually implemented its socio-economic development plan while creating an open, transparent and attractive investment environment for foreign investors