Why Vietnam's FDI Flows has very few Giants from the U.S and EU?

Why Vietnam's FDI Flows has very few Giants from the U.S and EU?

Being assessed as a country having advantages in attracting foreign direct investment (FDI) in comparison with other countries in the region, FDI inflows to Vietnam are still lacking giants from US, European countries.

According to data from the Foreign Investment Agency (Ministry of Planning and Investment), by the end of July, investment projects from the US poured $ 9.3 billion into Vietnam, ranking ninth among countries and European countries such as France - 17th with $ 2.8 billion and Germany - 20th with $ 1.6 billion.

These figures, when compared to Asian countries pouring capital into Vietnam such as Korea ($ 55.3 billion), Japan ($ 46.5 billion), Singapore ($ 41.6 billion) is very modest.

In fact, FDI into Vietnam, including in the form of direct investment as well as investment through M & A, shows that capital flow from Asian investors predominate over US or EU.

Commenting on this picture, Nguyen Van Toan, Vice Chairman of the Foreign Investment Association, said that although The U.S expressed its expectation to become the No.1 investor in Vietnam, up to now statistics shows that America's capital flows are not yet poured very much. This is similar to the capital from the European region, although many bilateral trade agreements are signed and potentialities are recognized.

Speaking of FDI capital stagnation, Mr. Toan gave two reasons. First, it was transparency in investment relations, economic relations as well as administrative procedures.

The second was the limited capacity to absorb capital flows in Vietnam. "When they bring the capital and technology to invest, but how Vietnam does to absorb that capital and human resources would do to keep up with technology and infrastructure issues? ", Toan questioned.

In particular, Mr. Toan also emphasized the story of intellectual property right when the  unexpected news of Vietnam's trademark, copyright, counterfeit goods and fake goods are a unsolved problem.

"In fact, now what have invested in Vietnam from the United States and the EU is not really in line with our existing potentials," said Toan.

Prior to this, Jonathan Moreno, President of the American Chamber of Commerce (AmCham) in Ho Chi Minh City when assessing business environment in Vietnam asserted that one of the barriers to FDI flows from the United States into Vietnam is still lack of transparency about the investment environment in Vietnam, causing hesitation for the businesses.

On the other hand, in some new fields such as clean energy, environment ... the regulations of Vietnam for investors is not so much so it has limited the capital pouring into here.

According to a survey conducted by the European Business Association (EuroCham) in Vietnam, the business environment index (BCI) in the first quarter in 2017 fell 7 points compared with the previous quarter, down to 78 points. Accordingly, EuroCham said that despite investment opportunities and conditions, but market barriers, liberalization and policies have not satisfied the businesses yet.

At the M&A Forum in July, Nguyen Quang Bao, Deputy General Director of Ban Viet Stock JSC, said that US and EU investors are very interested in Vietnam market but less successful than Asian ones. The Vietnamese market is small, while the demands for high transparency and cultural differences make them consider. Meanwhile, according to Tran Thanh Tam, Head of Markets group of KPMG Co.,Limited, Asian investors predominate in M & A deals in Vietnam due to the direct impact of Free Trade Agreement (FTA) wave.

Source: Investment Newspaper

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