What have we gained after 30 years of FDI attraction? Part 1: The steps of the "giants"

Many investors from 124 countries have invested in Vietnam in 19 areas. Source: Internet.

Within 10 years, from 2007 to 2017, foreign investors invested nearly 276 billion USD in Vietnam, much higher than the figure of 20 years ago. Along with the appearance of investors, especially large corporations from many countries with developed economies, FDI has become one of the important driving forces for Vietnam’s socio-economic development.

Big names choose Vietnam

The stabilized political situation, the constantly improved business investment environment, the low-cost labor, the high-speed trade opening and geographical advantage are the important conditions to increasingly attract FDI flow into Vietnam.

During the 30 years of FDI attraction, Vietnam has proven to be a "hot spot" for attracting FDI globally as it witnesses the presence of foreign investors, especially multinational corporations. Major players in the world such as Honda, Intel, Samsung, Yamaha, Panasonic, Microsoft, and LG etc., not to set foot in Vietnam, these corporations are constantly pouring capital into “billion USD” projects with goals to build Vietnam as a new production base, showing that Vietnam has been an attractive investment destination for foreign investors.

In 2006, with the announcement of a 1 billion USD (in HCM City) project, Intel Corporation (USA) has helped Vietnam put its name on the global IT map. This is also a pioneering event that will inspire Vietnam to attract big projects and other high technology projects. After Intel, in 2008, Samsung Group started investing in Vietnam with the project of an assembly plant in Bac Ninh with a total capital of 700 million USD. So far, Samsung has invested in manufacturing projects in Vietnam with a total registered capital of about 17 billion USD, making Vietnam a global manufacturing base for the Group. Also, a big name from Korea, with 3 projects are deployed in Vietnam, LG Group has invested in Vietnam total capital about 3 billion USD. In addition, for 20 years in Vietnam, total investment capital of Honda in Vietnam reached about 530 million USD. By the end of 2015, Honda contributed more than 40,000 billion VND in taxes for the budget and creates jobs for about 10,000 employees. In 2008, the highest FDI flow to date with 71 billion USD, Formosa Group (Taiwan) has invested nearly 10 billion USD in steel projects in Vietnam.

According to experts, the presence and footsteps of the "giants" have contributed to promoting the development of supporting industries, creating jobs, contributing to the creation of the high-quality human resources for Vietnam, changing the position of Vietnam in the export market.

Taking Vietnam's accession to the WTO (January 2007) to mark the stages in the process of attracting FDI, it can be seen that after Vietnam joined the WTO, FDI inflows into Vietnam have surpassed step. The first 20 years of FDI attraction (1987-2006) included the start-up period (1988-1990), followed by the first FDI wave (1991-1997) and next by the recession of FDI (1998-99) 2004). In those 20 years, Vietnam has initially attracted a considerable amount of foreign investment. However, in terms of quantity, the post-WTO is the backbone of FDI; since then, up to now, there have been 276/310 billion USD FDI invested in Vietnam, 8 times the result of the first 20 years.

Assessing the role of the FDI sector in the economy, Mr. Do Nhat Hoang, Director General of the Foreign Investment Department (MPI), said that the government focused on reforming the investment environment in the country. Over the past years, especially in the current term, it has had a positive impact on the FDI sector and has been highly appreciated by the foreign investors. The FDI sector has made an increasingly important contribution to the socio-economic development of Vietnam. These contributions show very specific figures. In recent years, the share of FDI in total social investment always accounts for about 25%, contributing over 20% to GDP. This is also a budget-paying sector, accounting for a high proportion of total budget revenue, accounting for a large and growing share of total export turnover of Vietnam at about 70%. In addition to the quantifiable contributions mentioned above, the FDI sector also has a spillover effect on other sectors of the economy, stimulating domestic investment resources, transforming the economic structure and reforming the SOEs, renovation of administrative procedures, finalization of market economy institutions, and promotion of international economic integration.

Make great changes

Dr. Phan Huu Thang, former director of the Foreign Investment Department, said that with large capital, with high quality of technology and management experience, FDI has created a great change in the fields of the economy, infrastructure, contributing to the economic restructuring of Vietnam in the direction of modernity, promoting Vietnam's economic integration process, enhancing the image of Vietnam in the international arena. .

Assessing the role of FDI in the development of the Vietnamese economy, the report also noted that foreign direct investment is an important driving force for Vietnam to achieve remarkable results in terms of trade and economic growth in general.

According to the World Bank, within 10 years from 2005 to 2015, the contribution to the budget of FDI enterprises doubled from 7.4% in 2005 to 14.1% in 2015. The export turnover of FDI sector also accounted for up to 70% of the total export turnover of the country. Vietnam's export structure has been transformed and diversified, from commodities and commodities, Vietnam's exports have changed a lot when the smartphone, computers and microprocessors, cameras, electronics and more recently, transportation appeared. There are now areas where the FDI sector is dominant in export as manufacturing products, whereas some items in which the FDI sector occupies a very high percentage of the total turnover such as telephones and components of 100%, electronics, computers 97%, transportation and spare parts 93%, machinery and The equipment is 91% etc.

Discussion on the impact of FDI on Vietnam, Prof. Nguyen Mai once said that the great advantage of the FDI sector after 30 years in Vietnam is to train a team of skilled workers. Many of Vietnam's laborers have been working in FDI enterprises. After a period of accumulated experience, they set up their own businesses and became big partners of FDI enterprises. The case of Precision Engineering, Service and Trading Co., Ltd. (VPMS) is a typical example. After more than 10 years of working for Japanese FDI companies, Mr. Nguyen Xuan Huy, Head of VPMS Sales Department decided to join VPM's friends. After 10 years of existence, VPMS is one of the leading supporting industries in Vietnam, able to produce components that require high precision, is the partner of the leading corporations in the world. Invest in Vietnam such as Honda, Yamaha, Panasonic, Samsung etc.

Chart of FDI attraction by country, territory and by investment sector. Picture: H. Anh.

According to experts, as a developing country, Vietnam is not a giant but must learn to walk on the feet of giants to make new advances in socio-economic development. And if we take advantage of the FDI sector, obviously it will be shortened and there will be less costly to make mistakes.