Vietnam is pushing hard to reform the existing legal framework to better mobilize resources and create new motivation for growth.

Production at General Electric in Haiphong. Photo: Le Sang

Counselor Nguyen Manh Hai, head of Investment Section of Vietnam’s Embassy in Germany, gave the view at a virtual conference discussing investment opportunities of ASEAN countries, including Vietnam, with European businesses on July 1.

“For many years, the country has been working on shifting its economic structure to ensure higher growth quality, productivity, and economic competitiveness,” said Hai.

“Vietnam encourages the development and expansion of export-oriented and foreign-invested sectors,” he continued.

According to Hai, along with positive impacts from next-generation free trade agreements (FTAs) that Vietnam is a part of, including the EVFTA, UKVFTA, CPTPP, or RCEP), socio-political stability is a key reason making Vietnam an attractive investment destination for foreign investors.

Mentioning the FDI attraction policy, Hai said the Ministry of Planning and Investment (MPI) is submitting to the government a strategy for FDI attraction in the 2021-2030 period.

“Such strategy would help boost economic growth by making sure that Vietnam’s business/investment environment is suitable to the form of investment activities that the country is looking forward to,” he noted.

Hai said Vietnam is scheduled to hold a digital investment conference in this third quarter while promoting investment into industrial parks or economic zones online.

Regarding the impacts of FTAs among Vietnam and the EU, UK, Hai said in 2020, Vietnam remained on the surplus side with US$29.3 billion in its trade relations with the EU.

The EU remained Vietnam’s second-largest export market, only behind the US, with a bilateral trade turnover of US$49.78 billion in 2020, a slight decline of 0.1% year-on-year despite Covid-19 impacts.

Vietnam, on the other hand, imported goods and products worth US$14.64 billion from Europe in 2020, an increase of 4.27% year-on-year.

“The EVFTA and UKVFTA not only facilitate trade relations between partners but also a key instrument to promote FDI inflows into Vietnam,” said Hai, referring to the removal of 99% of import tariffs and technical barriers.

Reopening the market for foreign investors a necessity

For HSBC Vietnam CEO Tim Evans, the attractiveness of Vietnam for foreign investors also came from a “hard-working, resourceful and entrepreneurial labor force.”

While the country’s access to numerous external markets through the signing of FTAs is a positive point, it is the growing consumer demand taking place within Vietnam that catches the eyes of investors.

“On a more macro level, Vietnam offers a stable government, consistency of policy, a stable currency, a low inflation environment, and the country sits on around US$100 billion of foreign exchange reserves, which further enhance the country’s appeal to foreign investors,” Tim told The Hanoi Times.

Tim, however, noted the most immediate issue that needs to be addressed is continuing to combat the Covid-19 situation.

He suggested this should be done in the form of a rapid rollout of the vaccine program and a border opening up to allow investors access to the market.

“Investors will not put their capital into a country unless they have access to the country,” Tim said.

“Longer term, the priorities need to be an investment into infrastructure, a continued focus on the ease of doing business, and a simplification of the tax code,” he stressed.