Vietnam is only one option in relocation wave from China, says economist

The countries with developed technologies such as Japan and the US, when seeking places for their long-term investments, consider possible destinations such as Vietnam, Indonesia and India very carefully.

The Foreign Investment Agency (FIA) reported the 4-year record high FDI in the first five months of the year with total registered capital of $16.74 billion by May 20, a sharp increase of 69 percent compared with the same period last year.

Vietnam is only one option in relocation wave from China, says economist

FIA’s report showed that Hong Kong is leading foreign investors in Vietnam with $5.08 billion worth of registered capital, amounting to 30.4 percent of total FDI, while South Korea ranks second with $2.62 billion and Singapore third with $2.09 billion.

VEPR director Nguyen Duc Thanh attributes the record high investment to the direct impact from the US-China trade war which has caused a wave of investment relocation out of China.

The countries with developed technologies such as Japan and US don’t think Vietnam is the No 1 destination. They highly appreciate Indonesia, Malaysia and Thailand, where the infrastructure is relatively good, or India with abundant labor force and English speaking workers. For these countries, Vietnam is just a ‘candidate’.

Meanwhile, Chinese investors highly appreciate Vietnam, which has cultural similarities and favorable geographical position.

Vietnam can take necessary measures to restrict the negative impact by selecting FDI projects thoroughly. Vietnam has the right to choose investors who can bring high quality projects, commit to long term investment and use advanced technologies.

Asked about the impacts of the US-China trade war on Vietnam’s economy, Thanh said Vietnam would get benefits in the long term. However, there will also be negative impacts if Vietnam receives investments which affect the environment and society.

However, Vietnam can take necessary measures to restrict the negative impact by selecting FDI projects thoroughly. Vietnam has the right to choose investors who can bring high quality projects, commit to long term investment and use advanced technologies.

 

Regarding the impact on trade, Thanh said it will be mixed. Vietnam’s exports may soar as Chinese goods become more expensive and Americans shift to use Vietnamese goods.

However, Vietnam’s exports to China, one of the most important markets, will be decreasing, because China will take action to protect its enterprises amid the decrease in exports to the US.

Statistics show that Vietnam’s export turnover to China has fallen considerably since Q4 2018.

A businessman in Hanoi also said the impact on investments are clearer than trade.

“It is obvious that foreign investors, including Chinese, have begun heading for Vietnam,” he said, citing an article in a Chinese newspaper which says the companies coming late will have to battle for Vietnamese workers.

Kim Chi

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