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Manufacturing operations in Samsung Vietnam.Source: Internet.

Decreased 21% due to Covid-19

According tofigures just released by the General Statistics Office, Ministry of Planning and Investment, FDI attraction in early 2020 dropped sharply. By the end of March, the total newly registered capital, adjusted and contributed capital to purchase shares of foreign investors reached US$8.55 billion, down 21% compared to the same period in 2019. In particular, about charter capital, there were 236 times of adjusted registration projects with the total additional registered capital of over US$1.07 billion, equal to 82% compared to the same period in 2019.

If in recent years, the activity of capital contribution and share purchase of foreign investors has increased sharply on a quarterly and yearly basis, or even nearly doubled compared to the same period last year. In the first quarter of 2020, the total value of capital contribution and share purchase of foreign investors is nearly US$2 billion. This figure is equal to 34.4% of the value of contributed capital compared to the same period in 2019, down to more than 65%. Not to mention, FDI disbursement also decreased by 6.6% compared to last year.

"This is the first reduction of FDI disbursement in the period of 2016-2020," said Nguyen Bich Lam, General Director of the General Statistics Office.

The cause of the recent decline in FDI is primarily due to the impact of the Covid-19 pandemic on the world economy. The spread of thedisease has caused many foreign enterprises to postpone investment survey activities or delay the implementation of projects.

According to Nguyen Van Toan, Vice Chairman of the Association of Foreign Investment Enterprises, the impact of Covid-19 caused trade and travel activities to be limited, so there was almost no delegation of enterprises.

“The Covid-19 epidemic affected investment surveys and preparing to build factories. From the beginning of the year until now, especially after the Lunar New Year, very few businesses have come to Vietnam to survey investment," Nguyen Van Toan said.

According to Toan, the Covid-19 pandemic broke the system in the value chain, the global production chain, and just one stage in the broken investment process will affect the whole system, stallingproduction and that is also the reason affecting FDI attraction.

According to Assoc. Dr. Dinh Trong Thinh, Academy of Finance, Covid-19 caused financial, monetary and investment disturbance. The stock market was in turmoil and the gold price suddenly increased, so the investment also became dangerous. This is the reason why the investors delay and investment activities decline at the highest level, in many countries, not only in Vietnam.

Assoc. Prof. Dr. Dinh Trong Thinh also said that after the Lunar New Year, he had the opportunity to meet with leaders of Samsung Vietnam in Thai Nguyen, BacNinh. Right from that moment, the representative of this company said that the Covid-19 epidemic caused them to be worried because their material reserve for production until mid-March is over.

“At that time, the outbreak was happening in Wuhan, which greatly affected the input materials for production of many businesses, it was difficult to take care of enough raw materials to maintain production, so the expansion of production of enterprises was more difficult. This is also part of the reason for the increased capital of FDI projects in this quarter compared to 2019,” said Assoc. Prof. Dr. DinhTrongThinh.

Good control of Covid-19 to attract FDI

According to experts, with the gloominess of the global economy in the first quarter, the results of recent FDI attraction are quite positive.

In some key localities in attracting FDI such as Vinh Phuc, information from the Management Board of Industrial Zones of Vinh Phuc province said that the complicated situation of Covid-19 has affected revenue collection and attracting foreign investment, but thanks to actively supporting businesses to implement projects, solving difficulties and problems, seeking new investors, in the first two months of 2020, Vinh Phuc continues to be a destination for domestic and foreign investors.

Accordingly, the province has attracted two new FDI projects and four times of projects to increase investment capital with a total registered capital of US$21.4 million.

Making forecasts for the whole 2020, experts have relatively positive comments.

Assoc. Dinh Trong Thinh said that if the epidemic is controlled by the end of April 2020, GDP growth is still expected to be over 6% and FDI attraction is expected to be at US$38 billion, equivalent to 2019. This expert emphasized that increasing GDP growth and FDI attraction also depend on the ability of epidemic control countries of traditional partners of Vietnam, because if those countries are still heavily affected by the epidemic, they will affect the outputs and exports of Vietnam.

According to Nguyen Van Toan, even in the difficulties, we will find positive signs. Post-Covid-19, like a "compression force", FDI attraction may rebound after a period of quiet.

Ready capital, projects will be implemented quickly. Vietnam is one of the countries with the best assessment of the Covid-19 epidemic control, which will be a plus point in attracting FDI investment in the future. If Vietnam continues to have a good anti-epidemic momentum as now, the confidence of countries and FDI enterprises will be higher.

“It is forecasted that FDI into Vietnam in 2020 will decrease by about 10-20% compared to 2019, because this disease will affect strongly in the first half of the year. The second half of 2020 will be the time for the economies of countries to recover, accordingly, FDI in 2020 may decrease compared to 2019. The lesson for us after Covid-19 has passed is that the Government must take advantage of this opportunity to reduce dependence on China, must find other sources in the direction of either self-supply or attract FDI to invest in raw materials to ensure the supply of raw materials for production,” Toan stressed.

Experts also said that, with Directive 11/CT-TTg on urgent solutions to solve difficulties for businesses affected by Covid-19, FDI enterprises will also gradually remove difficulties in real estate business activities, thereby creating opportunities for Vietnam to attract more FDI inflows when the epidemic is over. In addition, the trend of foreign investment flows shifting from China to Vietnam to avoid US taxes in the US-China trade war, the EVFTA, effective from mid-2020will continue to be a driving force for FDI into Vietnam.