Increasing foreign investment resources from improving the business environment

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FDI investors are always interested in improving the business environment in Vietnam. (Photo: Tuan Anh/TTXVN)
FDI investors are always interested in improving the business environment in Vietnam. (Photo: Tuan Anh/TTXVN)

FDI capital flows are more “cautious”

A survey report of FDI enterprises at the Provincial Competitiveness Index (PCI) and Provincial Green Index (PGI) in 2023 recently announced by the Vietnam Confederation of Commerce and Industry (VCCI) showed that the rate of FDI enterprises increasing the scale of investment capital in 2023 had reached 30.27%, a slight increase compared to 30% in 2022, the reason was that FDI enterprises were still quite cautious when considering adjusting their scale in the context of unpredictable economic developments.

Regarding the business situation, 46.49% of FDI enterprises reported profits in 2023, a slight increase compared to 42.77% in 2022. The proportion of enterprises reporting losses decreased to 42.32% in 2023, lower compared to 44.88% in 2022 and significantly lower than the record level of 51.33% recorded in 2021. This positive growth trajectory showed that FDI enterprises were on more steady recovery path after the pandemic.

However, only 26% of FDI enterprises said they intended to expand their business in 2024 and 2025, down from 33% the previous year and significantly lower than the most optimistic level after the pandemic being 47.7% in 2021. Furthermore, this rate in the period from 2014 to 2019 always remained above 45%. The report said that this decline also reflected the more cautious trend of FDI enterprises due to the impact of the current unpredictable global economic context.

According to a report from the Ministry of Planning and Investment, from the beginning of the year to April 20, 2024, the total newly registered capital, adjustments and capital contributions to purchase shares, purchase capital contributions of foreign investors reached more than US$ 9.27 billion, an increase of 4.5% over the same period in 2023. However, of this, although the total newly registered capital increased by 73% over the same period, the total additional registered capital reached more than US$ 1.23 billion, down 25.6% over the same period; Total registered capital for capital contribution and share purchase by foreign investors reached nearly US$ 929.6 million, down 70.1% over the same period.

Along with the effects of international market fluctuations, according to experts and enterprises, many foreign investors are still afraid of challenges from complying with regulations and the burden of policy implementation, which has influenced investment decisions and investment expansion in Vietnam. The PCI and PGI report 2023 said that after 2018, the time which FDI enterprises had to spend to carry out administrative procedures had decreased, but in 2022 and 2023, the proportion of FDI enterprises having to spend more than 5% of time spent on administrative procedures were higher than before the pandemic.

The “key” of improvement comes from reform

For enterprises from the United States, according to surveys in the PCI and PGI report 2023, investors faced more difficulties in areas related to regulations and policies, including policy and legal fluctuations; implementing administrative procedures, stabilizing land use and other property rights.

For investors from China, the biggest difficulty was finding customers, next was market fluctuations, recruiting workers and finding business cooperation partners. The biggest difficulties Japanese businesses faced when operating in Vietnam were changes in policies and regulations, and implementation of administrative procedures.

Previously, a survey of Japanese enterprises abroad at the end of 2023 by the Japan External Trade Organization (JETRO) also showed that, in Vietnam, regulations, policies and administrative procedures were the biggest obstacle to business operations. Notably, Japanese enterprises operating in other ASEAN countries such as Thailand, Singapore and Malaysia had few difficulties in these areas.

For enterprises from Europe, a survey published in early April 2024 by the European Business Association in Vietnam (EuroCham) showed that they also expressed optimism about Vietnam’s economy. both in the short and long term. In the second quarter of 2024, one-third of enterprises surveyed felt optimistic about development prospects, of which more than half of respondents predicted the number of orders and revenue would be higher in the second quarter. Looking to the long term, this optimism was further reinforced with 71% of enterprises feeling positive about the long-term prospects in Vietnam in the next 5 years.

However, many European enterprises reflected that they were facing legal barriers in Vietnam, thereby hindering market entry and long-term investment. In particular, administrative burden was considered a major obstacle to establishing and expanding operations, in addition, the ambiguity of regulations also created uncertainty and hindered strategic planning…

From the above issues, the FDI business community has raised the desire to improve the investment and business environment. For example, at a meeting with Prime Minister Pham Minh Chinh on May 9, Mr. Park Hark Kyu, General Director in charge of finance of Samsung Group, expressed his desire and belief that Vietnam would continue to improving the business environment, from which Samsung planned to invest an additional US$ 1 billion per year in Vietnam in the coming time, continue to increase the number of Vietnamese enterprises participating in the supply chain and promote cooperation in training human resources…

Also on this issue, according to Mr. Dominik Meichle, President of EuroCham, Vietnam had huge economic potential and resolving legal challenges was the “key” to fully realizing that potential. Simplifying procedures and establishing more transparent regulations would help facilitate both Vietnamese and foreign enterprises, thereby helping Vietnam become a leading investment destination in the region, bringing benefits to domestic enterprises, attracting international capital and strengthening economic partnerships. Similarly, Mr. Joseph Uddo, Chairman of the American Chamber of Commerce in Vietnam (AmCham), said that high-quality foreign investment capital only flowed to localities with good governance quality and the most favourable business investment.

In addition, according to experts and enterprises, to receive opportunities from the major shift in the global supply chain, Vietnam should continue to improve the system of policies, regulations, and reform of administrative procedures… along with paying attention to the issue of facilitating connections between foreign investors and domestic partners and customers. In addition, policymakers should continue to accelerate policies and measures to improve the quality of local labour, especially high-skilled labour, gradually transforming Vietnam’s labour structure from mainly relying on the competitive advantage of cheap labour to high quality labour to attract foreign investment.

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