Vietnam sees growing inflow from European investors

Vietnam sees growing inflow from European investors

Investment from the EU to Vietnam is expected to surge in the time to come as many European firms are showing their interest in the market while the Vietnamese government is also boosting plans to attract more capital from the important partner.

Many European firms have recently come to Vietnam to explore investment opportunities ahead of the signing of the EU-Vietnam Trade Agreement (EVFTA), which is expected to be ratified in the next few months.

A Finnish business delegation, including firms BMH Technology Oy, Fortum Power and Heat, Simosol Oy and led by Finnish Minister of Economic Affairs Mika Lintila, was the latest European investors who came to Vietnam last week to explore investment opportunities.

The latest survey released last week by the European Chamber of Commerce in Vietnam (EuroCham), also showed that most of European correspondents forecast Vietnam will become a hub for European business in the ASEAN region and EVFTA will have significant impact on European businesses in Vietnam.

“Our members paint a positive, optimistic picture of the agreement, with 85 percent anticipating a significant or moderate impact on their business and investment plans in the long term,” Nicolas Audier, Co-Chairman of EuroCham.

Some 80 percent of EuroCham members also believe the EVFTA will improve Vietnam’s competitiveness compared to other countries such as China, Japan and South Korea, he added.

According to Audier, Vietnam is open for business as an attractive trade and investment destination as shown in the latest Business Climate Index (BCI) released in early this month.

Under the BCI, Vietnam gained 84 points for the second quarter of 2018, up six points from the previous quarter. The sentiment of European businesses is at its strongest in 18 months, and just two points below the all-time high of the third quarter of 2016.

The latest BCI also showed that EuroCham members reported an optimistic outlook on various issues, from their own investment and profit projections to workforce levels and Vietnam’s macroeconomic outlook. More than 70 percent reported a positive situation for their enterprises in the last quarter, with 65 percent describing it as “good” and 12 percent as “excellent”. Looking ahead to the next quarter, 64 percent believe their business situation will be “good” with a further 15 percent answering “excellent.”

Government in actions

According to the Ministry of Planning and Investment (MPI), economic and trade ties between Vietnam and the EU are developing relatively favorable, but FDI is still too modest, especially in high technology and modern services sectors.

Despite the EU’s strong will of pushing up investments in Vietnam, the inflow from the bloc is still far below expectations. Vietnam attracted only US$24 billion from the investors, who poured US$334 billion abroad last year. Among the European countries, the Netherlands is currently the top investor in Vietnam with total registered capital of US$9.33 billion. France, Luxembourg and Germany followed with US$3.62 billion, US$2.33 billion and US$1.8 billion, respectively.

According to Audier, though Vietnam is an attractive destination to foreign investors, the government must continue improving business and investment environment to lure more investors, especially in the context of the US-China trade war and the return of trade protectionist trend, which will affect the Vietnamese economy.

Minister of Planning and Investment Nguyen Chi Dung also admitted that the prospect of attracting more FDI from the EU depends on Vietnam’s efforts to meet the investors' requirements for an open, transparent and predictable legal system besides effective regulations on intellectual property, anti-corruption and law enforcement.

Prime Minister Nguyen Xuan Phuc in a recent conference on 30 years of FDI attraction in Vietnam also required relevant ministries and agencies to ‘meet what investors need’ in a move to lure foreign investors, including those from the EU.

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