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New-generation FTAs bring many benefits for attracting investment

23/08/2019

New-generation free-trade agreements have created a new impetus for attracting foreign investment in Vietnam. Economic expert Nguyen Van Toan of  the  Association of Foreign Invested Enterprises spoke with Customs News on this issue.

Could you please assess the impact of new generation FTAs, especially the EVFTA and CPTPP, for attracting foreign investment into Vietnam?

Most FTAs create a certain attraction for foreign investment into Vietnam. Especially, the CPTPP and EVFTA will have a great impact, because when foreign enterprises invest in Vietnam, goods will meet requirements on origin not only for export to ASEAN countries but also to CPTTP countries, 27 member states of the EU, countries and territories which Vietnam has expanded trade and investment relations.

Notably, with the signing of the two agreements, investment activities from member countries will increase significantly due to many advantages. Bilateral commitments between the European Union (EU) and Vietnam that were approved in June have brought benefits to Vietnam in the exports with the decrease of 86 percent tariff lines to 0 percent, accounting for 75 percent of the export turnover into the EU when the EVFTA takes effect. The Vietnam-EU Investment Protection Agreement (EVIPA) will also bring many advantages for capital flow from the EU to Vietnam. In recent years, European enterprises still feel concerned about investment in Vietnam, accumulated until the end of 2018, in more than 30 years, 28 countries in the EU invested US$25 billion in Vietnam, Korea invested US$62 billion, Japan invested US$57 billion. Meanwhile, Germany implemented foreign investment about US$ 60 billion per year and France invested about US$50 billion.

The investment of the EU in Vietnam has a lot of potential. In addition, investment attraction from the EU also has advantages because Vietnam has many projects related to the strength of the EU, especially in the sectors of high-tech agriculture, processing and manufacturing industry, banking and financial services, medical examination and treatment, and logistics.

In the past time, investment activities in Vietnam’s agricultural sector have not developed; the total registered investment capital in Vietnam was 2 percent in 30 years ago, now it is only 1 percent. Foreign investment in the agricultural sector has not reached US$100 million a year. With the advantage of the investment incentive commitments signed with the EU, the agricultural sector is expected to attract EU investment if there are reasonable policies.

The EU’s investment capital is also consistent with the approach to industrial revolution 4.0. Vietnam has the advantage of industrial development 4.0 thanks to the well-developed information technology infrastructure compared to other countries in the region. The high rate of smartphone users is in line with the trend of sharing information and connecting big data of the industrial revolution 4.0, the potential human resources and the effective training system that are changing in the right direction. The determination of the Government is also creating motivation to develop technology 4.0. These characteristics show that investment activities between Vietnam and the EU have brought benefits to the two parties.

Some say the EVFTA and CPTPP are creating motivation to shift foreign investment to Vietnam, what do you think about this?

This is correct. Because in fact, there has also been a shift of capital of foreign enterprises from some regional countries to Vietnam and Southeast Asian countries, typically from China. Besides, the main reason for this shift is that investment policies and labour cosst are no longer competitive, and investors feel concerned about politisl, there have the reasons from the attraction of the deep integration of Vietnam, especially the CPTTP and EVFTA have brought benefits for Vietnam in attracting foreign investment.

What should Vietnam do to take advantage of FDI?

The consideration of the efficiency of attracting foreign investment is not only based on the amount of registered capital but also on the efficiency of the investment inflows related to value added and using labour, and spread from foreign investment activities to domestic enterprises. The current problem is whether Vietnam is ready to access foreign investment or not. Because if it is not ready, it will not only not take advantage of the investment capital flows, but also face many pressures on competition with domestic enterprises and brands. Therefore, to make good use of foreign investment capital, first of all, Vietnam should strengthen the workforce to meet the requirements of foreign investors, and investors can use on-spot labour and have a high quality labour force. In addition, it is necessary to develop enterprises and corporations strong enough to cooperate with foreign investors.

Currently, many large Vietnamese enterprises have participated in high-tech agriculture, aviation and automobile manufacturing. Thus, we need appropriate policies to develop private economic groups to counterbalance foreign investors, thereby building national brands capable of reaching out to the world. At the same time, it is necessary to strongly develop small and medium-sized enterprises to join the value chain of FDI enterprises and Vietnamese economic groups. The building of brand products, business brands, regional brands and national brands will create a motivation for Vietnam’s development. Institutional reforms, changes in administrative management thinking, simplification of procedures and improvement of capacity of officers, enhancement of transparent governance, cutting unofficial costs and regulations on infringement of intellectual property rights are a great determination of the facilitating Government.

Foreign investment attraction results show the great growth of investment capital from China. This is causing concern for State management agencies and localities on sustainability in investment attraction. What do you think about this issue?

In recent years, foreign investment attraction has recorded a strong growth of investment capital from China. If China’s investment in Vietnam ranked 10th in previous years, it ranks 4th and 5th in 2019. Facing this situation, localities need to have selection and control in attracting investment.

They should only encourage investment projects that are eco-friendly, use high technology and use labour, resources and energy reasonably, and do not negatively affect sustainable development, despite countries and territories where investors come from. Currently, localities do not welcome Chinese investors, but they also need to consider each specific project to avoid causing difficulties for legitimate investors. On the side of the Association of Foreign Investment Enterprises, when working with Chinese investors, the Association also recommended Chinese investors to ensure environmental, technological and labour use requirements in the investment project in Vietnam to create a friendlier image in Vietnamese enterprises.

Source: Custom News