Vietnam - bright spot in FDI attraction in ASEAN

News and World Report of the US has ranked Vietnam eighth among 29 best economies to invest in, and first among the Association of Southeast Asian Nations (ASEAN) in the list.

Vietnam - bright spot in FDI attraction in ASEAN

The next closest ASEAN countries in the list were Malaysia (13th), Singapore(14th) and Indonesia (18th). Meanwhile, Uruguay topped the list, followed bySaudi Arabia, Luxemburg, India and Poland.

The US News and World Report’s rankings werederived from the results of a global perceptions-based survey which saw nearly7,000 business decision makers rank countries based on eight equally weightedcountry attributes; economic stability, favourable tax environment, skilledlabour force, technological expertise, entrepreneurship, innovation, dynamismand corruption.

Since introducingmarket-oriented policies underits Doi Moi (renovation or reform) programme in the 1980s,Vietnam’s economic growth has been among the fastest in the world – and FDI hasplayed a large part in that by attracting investment in a variety of sectors,it said.

A total of 112countries and territories invested in the country in 2018, with Japan leading the way with 8.59 billionUSD – followed by the Republic of Korea (7.2 billion USD) and Singapore (5billion USD0).

The country’s manufacturing and processing sector has traditionally gained themost interest from foreign investors, and the two sectors attracted 16.58billion USD in FDI last year – followed by the real estate sector (6.6 billionUSD) and retail sector (3.67 billion USD).

The country’s Foreign Investment Agency (FIA) last month announced that a totalof 14.22 billion USD in FDI has been disbursed so far this year – a 7.3 percentyear-on-year increase – and 2,759 new projects with a total commitment of 10.97billion USD have been approved.

Sam Cheong Chwee Kin, Executive Director and Head of United Overseas Bank (UOB)Group’s Foreign Direct Investment Advisory Unit, praised Vietnam as a brightspot in FDI attraction in ASEAN.

He paid special attention to the Vietnamese government’s efforts tobolster infrastructure at key economic and industrial zones such as the northernport city of Hai Phong.

 

Vietnam began establishing special economic zones (SEZs) to attractlabour-intensive manufacturing in the late 1990s and 2000s, and between 60 to70 percent of all FDIs are in these SEZs.

Drawn to Vietnam by its competitive costs, low wages and developedinfrastructure, investors have another reason to stay when they find out aboutthe tax incentives which are applied to a variety of industries and projectsthroughout the country.

“Vietnam has quietly developed one of the most competitive tax regimes inSoutheast Asia,” said Koushan Das, who oversees projects in India and ASEAN forbusiness consultants Dezan Shira & Associates.

“Foreign investors, particularly those involved in slightly higher value-addproduction, should be able to use incentives… to position themselves ahead oftheir competitors in the years ahead,” added Das.

While labour costs may be comparatively lower in Vietnam, the country hasemphasised the importance of developing skilled labour as a key factor inencouraging FDI – while also encouraging innovation and increased use of newtechnologies.

Although Vietnam’s labour productivity has improved over the past decade, it isstill low in comparison with other ASEAN members – making this arguably thecountry’s biggest challenge in maintaining its status as a regional investmenthub./.VNA

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