As of present, the majority of foreign direct investment (FDI) and foreign indirect investment (FII) inflows to Vietnam are from Asian countries. Vietnam, therefore, should look for other markets as the Covid-19 epidemic is wreaking havoc in the region, with EU being an attractive option, Kinh te & Do thi quoted an expert as saying.

Data: GSO. Chart: Ngoc Thuy.

In addition to a long break from the Lunar New Year Holiday, the Covid-19 epidemic is one of the main reasons leading to a decline of 23.6% year-on-year in FDI commitments to Vietnam in the January – February period, which stood at US$6.47 billion, data from the Foreign Investment Agency under the Ministry of Planning and Investment has shown. 

During the period, disbursements of FDI projects in the country totaled US$2.45 billion, representing a decline of 5% year-on-year.

Nevertheless, inflows from Vietnam’s major FDI partners such as China, South Korea, Hong Kong and Japan are still growing in the two-month period. Out of 73 countries and territories investing in Vietnam in the period, Singapore took the lead with US$4.12 billion, China came second with US$720.4 million, while the third place belonged to South Korea with US$425.4 million, followed by Hong Kong, Taiwan and Japan.

However, things could change dramatically in March as those economies are still struggling to contain the deadly coronavirus, said the expert.

With the EU – Vietnam Free Trade Agreement (EVFTA) in place, Vietnam becomes an attractive destination for European investors, which is particularly significant as most countries in the Southeast Asian region do not have a similar deal with the EU.

However, as Member of the European Parliament Iuliu Winkler openly said a trade deal with ASEAN is the bloc’s “long-term ambition”, and the EVFTA is the first step towards this target, the two sides are predicted to eventually set for such a trade deal. 

The deal would inevitably diminish Vietnam’s advantage as the EU’s FTA partner. It is, therefore, vital for Vietnam to utilize the current “golden period”, when a potential EU – ASEAN trade deal is still on papers, to penetrate EU market and attract FDI from European investors, the expert suggested.

Meanwhile, experts from Hanoi-based lender BIDV said the impacts of Covid-19 on FDI inflows to Vietnam would only be temporary. While Vietnam is effectively containing the epidemic, the contrasting situation in other countries could push investors in China and its territories such as Hong Kong and Macau to move to Vietnam.