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TOP 5 INVESTING COUNTRIES / TERRITORIES, 3M 2021 TOP 5 SECTORS ATTRACTING FDI
Total capital ($ billion) Proportion (%) Total capital ($ billion) Proportion (%)
Singapore 4.58 45.5 Power, Water, Gas 4.99 49.5
Japan 2.09 20.8 Manufacturing & Processing 3.9 38.9
South Korea 1.18 11.7 Real Estate 0.600 5.9
China 0.963 9.5 Science & Technology 0.167 1.6
Hong Kong (China) 0.294 2.9 Warehouse and Transportation 0.113 1.1
Other 9.6 Other 3
Source: General Statistics Office (GSO)

According to analysts, the sector has now Finally, capabilities differ between domestic CPTPP by 2024. Mr. Hiroaki said this is
risen to fourth on the list of sectors attracting suppliers and compared to foreign suppliers, expected to facilitate the speed of outlet expan-
investment, continuing a positive trend that while at the same time customer expectations sions by Japanese retailers like Aeon Vietnam
began last year. are heading ever-upwards. compared to other foreign retailers that are
non-members, such as those from Thailand,
Stumbling blocks remain Benefitting from FTas South Korea, France, and elsewhere.
Although there are many advantages for Despite the challenges, Vietnam holds major In the time to come, Mr. Doanh com-
foreign companies when investing in Vietnam, advantages in attracting FDI thanks to its many mented, Japanese and Indian investors will
there are also challenges that need to be over- FTAs. It was very active last year in growing continue to be interested in Vietnam, while
come to truly capture opportunities. According its international profile, with three trade agree- the country is also ready to welcome a wave
to HSBC research, the first challenge is human ments signed: the UK-Vietnam FTA (UKVFTA), of production shifting by companies in devel-
resources. Despite having a young, hard- the EU-Vietnam FTA (EUVFTA), and the oped countries. A survey released by the
working, and enthusiastic workforce, many Regional Comprehensive Economic Partnership Japan External Trade Organization (JETRO)
workers lack skills and experience. As of the (RCEP). Vietnam has increased its economic in early February showed that Vietnam con-
second quarter of 2020, one-third of Vietnam’s integration by joining the WTO and signing tinues to be an investment destination for
workforce was classified as unskilled. Many 14 active multi- and bilateral trade agreements. Japanese businesses to consider. Accordingly,
workers have not been able to effectively “This international trade connectivity has been 46.8 per cent of surveyed enterprises said
adapt to continuous changes in the market, a major driving force of Vietnam’s economic they would expand their business this year.
especially given the impact of Industry 4.0. development,” said Mr. Evans. “FTAs lower Rising revenue in the local market and export
Another issue stems from multinational the barriers to trade, creating more opportu- expansion as well as high growth potential
corporations’ local supply chains. With rising nities for foreign companies to come to Vietnam are the leading reasons why Japanese busi-
international standards, international corpo- and also providing more opportunities for nesses are looking to expand in Vietnam.
rations are under increasing pressure to look Vietnamese companies to trade and transact In terms of sectors and fields, initially
deeper into their supply chains to ensure that internationally.” the key focus of FDI into Vietnam was in
every step meets global standards on envi- Mr. Hiroaki told VET that the Compre- the textile and footwear sector, and this was
ronmental, social, and corporate governance hensive and Progressive Agreement for Trans- predominantly driven by production costs,
(ESG). Many local companies are still coming Pacific Partnership (CPTPP) and the RCEP according to HSBC. While this had a positive
to terms with what that actually means for will bring many advantages to retailers, espe- impact on the country, authorities are now
them and how they can adapt to this new cially foreign retailers like Aeon Vietnam. trying to ensure that Vietnam moves up the
reality. Last but not least, despite improve- Firstly, regarding import and export taxes, value chain and have therefore targeted FDI
ments in recent years, administrative proce- 86.5 per cent of tariff lines on products linked to technological production. Elec-
dures and regulations for foreign businesses imported to Vietnam will be eliminated by tronics exports reached a record $96 billion
in Vietnam can still be complex and onerous. 2023 and 97.8 per cent by 2030. For products in 2020, representing 34 per cent of total
One prominent investor, Aeon Vietnam, exported from Vietnam to Japan, 90 per cent exports. Vietnam has also emerged as a
has not reached its initial plans due to ongoing of tariff lines will be eliminated by 2024. rising supplier of processor/controller chips.
challenges. According to Mr. Sasamori Hiroaki, Immediately upon joining the CPTPP, Japan While China produces 70 per cent of com-
Back Office Executive Director at Aeon Viet- eliminated 100 per cent of import taxes on puters globally, Vietnam’s rising production
nam, firstly, it is hard to find locations that agricultural and fishery products from Vietnam. of finished computers has supported chip
comply with Aeon’s business strategy in devel- “By leveraging these advantages, Aeon Vietnam demand. Recently, along with the success
oping “One-Stop-Shopping” malls to enrich strives to provide Vietnamese consumers with of Samsung and Intel in Vietnam, tech giants
lifestyles in local communities. With this more chances to experience high-quality prod- such as Google and LG have also shifted
strategy, Aeon Vietnam prioritizes developing ucts from Japan at reasonable prices,” Mr. their supply chains to the country. “With
shopping malls in suburban areas. Infrastruc- Hiroaki said. “Moreover, we will continue the effective handling of the pandemic, pref-
ture in such areas, however, is yet to develop promoting Vietnamese products to Japanese erential policies for FDI, and high demand
or is developing slowly. Secondly, investment consumers through the Aeon chain, to con- for tech products in the ‘new normal’ around
costs (including rentals) are quite high in tribute to boosting Vietnam’s export turnover.” the globe, Vietnam, as a new production
Vietnam. The average investment per shopping In particular, Vietnam will eliminate the base for tech giants, will become an ever
mall is some $180-$200 million, while the ENT (Economic Needs Test) for foreign retail- more attractive destination for investors,”
average payback time is about ten years. ers from the eleven member countries of the Mr. Evan believes. %

APRIL 2021 | VIETNAM ECONOMIC TIMES | 15