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COVER STORY

he Covid-19 pandemic has had a dev- Nevertheless, the slowdown has been espe- foreign investors find it challenging to come
astating effect on trade around the cially evident in the consumer electronics to Vietnam and negotiate with local partners
T world, through falling demand and manufacturing sector, according to the “Covid- and identify sites for new investment projects.
supply chain disruptions. Despite the negatives, 19 Impact Assessment: Analysis of the Poten- “US investors need to spend at least four
however, Vietnam’s export and import tial Impacts of Covid-19 on the Vietnamese months to obtain legalized documents for
turnover last year totaled $543.9 billion, a 5.1 Economy” report from PwC Vietnam last submission in Vietnam,” she said. “In addition
per cent increase against 2019, with a signifi- year. “Most expansion plans have been sus- to these inevitable complications from the
cant increase seen in exports. Alongside this pended or stopped since the Covid-19 out- pandemic, international investors have also
overall growth, the trade intensity of FDI also break,” it stated. “Although the outbreak is faced challenges unique to Vietnam.”
increased for the first time in a decade. Despite likely to result in a delay in investment, rather “Specifically, Vietnam has recently adopted
Vietnam being one of the few countries in than threaten the overall attractiveness of many important laws, among which are the
the world to post positive economic growth the country in terms of foreign investment, current Investment Law, Enterprise Law,
of 2.91 per cent last year, though, it is clear the lower level of FDI that is expected may Securities Law, and Public Private Partnership
that a key impact of the Covid-19 crisis has place considerable short-term pressure on Investment Law. The challenge right now is
been a slowdown in FDI to certain key indus- the Vietnamese economy.” the pending issuance of the implementation
tries in the economy. The impact of the Covid-19 outbreak so decrees for some of these FDI-fundamental
far has varied, both by sector and by city or laws. As a result, governmental agencies still
Investor hesitation province. In particular, central Vietnam appears adopt the old approach and practices when
Foreign-invested enterprises (FIEs) have to have sustained the most dramatic impact, reviewing and licensing foreign investment
played a significant role in Vietnam’s export with Da Nang announcing that its disbursed activities. This has also created practical issues
and import of goods and services. The FDI FDI - especially in the tourism sector - fell 80 for the approval and certainty of foreign
sector accounted for 72.2 per cent of total per cent last year compared with 2019. investment projects.”
export turnover and 64.3 per cent of import Depressed investment sentiment and lin- On a positive note, Vietnam has been
turnover. This reflects FIEs’ preference for gering global Covid-19 uncertainty may con- praised by the global community for being
trade-intensive sectors such as manufacturing tinue to adversely affect FDI flows to Vietnam one of the few countries to effectively contain
and crude oil and the positive effects of the in the short term, according to Ms. Wee. the pandemic. “Together with the adoption
free trade agreements (FTAs) Vietnam has “That said, we believe the continued vacci- of new laws, including the Investment Law
recently signed. nation rollout globally will result in a gradual and the Enterprise Law, this has helped boost
FDI has unquestionably been a key driver recovery in global demand and investment international investor confidence that Vietnam
of Vietnam’s economic growth. “Global appetite,” she told VET. “This is evidenced remains a safe destination for their investment,
demand uncertainty has weighed on FDI by the recent improvement in export data and can provide the right environment for
inflows, but we think inward investment from Asian countries, with Vietnam’s exports the economy in general and FDI companies
should remain strong medium-term,” said rising 24.1 per cent year-on-year in Q1 2021. in particular to transition to a ‘new normal’
Ms. Michele Wee, CEO Vietnam at Standard FDI flows to Vietnam should improve in 2021 relatively quickly,” she added.
Chartered Bank. “FDI pledges - which indi- and 2022 thanks to the better global backdrop,
cate the size of future disbursements - rose along with ongoing investment relocations Darkness before the dawn
18.5 per cent year-on-year to $10.13 billion to Vietnam due to the US-China trade and Vietnam began 2021 with strong growth
in Q1 2021, according to the General Sta- technology dispute, which is prompting the prospects underpinned by robust exports
tistics Office (GSO). Of this, 49.3 per cent sustained relocation of low-tech manufac- and FDI flows after having successfully
is destined for electricity distribution, while turing to Vietnam from China.” contained Covid-19. The successful manage-
38.7 per cent is to be invested in manufac- Meanwhile, Ms. Nguyen Lan Phuong, Part- ment of the pandemic so far has already
turing and processing.” ner at Baker & McKenzie Vietnam, sees that enabled the country to capture a larger share -

NOTICEABLE IMPACTS OF THE COVID -19 OUTBREAK ON THE FDI SECTOR AND INVESTMENTS
Industry Factory Location Action Details
Samsung Vietnam Electronics Samsung Display Bac Ninh Quarantined Authorities ordered people working at a unit of Samsung Display
(South Korea) Bac Ninh and isolated in Bac Ninh province to be quarantined and isolated after a worker
tested positive for Covid-19. Samsung, however, has stated that its
production lines remain unaffected

Poongsan System Electronics Poongsan System Hai Duong Postponing n/a
(South Korea) Hai Duong investment
Google (US) Electronics n/a n/a Reconsidering n/a
investment timing
Microsoft (US) Electronics n/a n/a Reconsidering n/a
investment timing
Apple (US) Electronics n/a n/a Reconsidering n/a
investment timing

Shan Hong Textiles Shan Hong Dong Nai Postponing Postponing investment from 9/2020 to 11/2020
Vietnam Factory investment
Dong Nai
Source: PwC Research and Analysis, 2020

APRIL 2021 | VIETNAM ECONOMIC TIMES | 9