More FDI investment comes with opportunities and risks

(ĐTTCO) - Speaking with Saigon Investment, Asso. Prof. Dr. Tran Dinh Thien, a member of the Government's Economic Advisory Group, expressed that Vietnam has a great opportunity to welcome a wave of investments from FDI enterprises that are considering relocating from China.

Close view of a Panasonic Vietnam production line. Photo: VIET CHUNG

Close view of a Panasonic Vietnam production line. Photo: VIET CHUNG

The core issue though is Vietnam's ability to prepare for such lucrative investments to come into the country by offering the best possible working conditions.  

JOURNALIST: - Sir, how do you assess the shift in the world production supply chain today, and the US and some other countries advocating withdrawal of investment capital from China?

Asso. Prof. TRAN DINH THIEN: - How to deal with China is USA’s most important issue today. The US is seriously building and creating a new production supply chain to escape the monopoly of the current Chinese supply chain. China has over the years risen very fast and is seeking to dominate the world economy and also have maximum control over technology. This is the result of more than 40 years of external resources pouring into China, of which the most important resource is the participation of multinational economic groups. If the Covid-19 pandemic had not disrupted the supply chain built by China, it is unclear how long the flow of foreign investment into China would have continued.

The United States and many European countries are establishing economic fronts to deal with China, that are focused on pulling capital out of China. For example, new emerging supply markets such as India and the "Diamond Quartet" have emerged, forcing China to change its economic structure. Currently, even though China is fighting off pressure from the US, it is still not strong enough to compete fiercely with the US for top position.

- Sir, what opportunities does this shift bring to Vietnam?

- Although Vietnam may be a country that is still low in the production supply chain, we are working hard to become an important link. This is very significant, as Vietnam is willing to innovate to meet the needs of integration, and have more trusted partners. Vietnam is now becoming more attractive to foreign investors, and even though Vietnam's institutional reforms need some changes, the country offers stability along with commitment. These are plus points for Vietnam as the investment environment is becoming more and more attractive and competitive.

Because we consider private economy to be an important motivation, Vietnam has been able to maintain good growth. Along with this policy, the State has created more development opportunities, and helped structure the economy better. Therefore, many opportunities now exist if we take advantage of it.

- In order to catch this wave of FDI investments effectively and turn it into motivation for growth, according to you, what specific policies does Vietnam need at this time?

- Great opportunity also comes with great risk. These are small, low-tech enterprises that are willing to relocate from China into Vietnam, while larger corporations are very few in number. Recently when the industrial zone began to develop, the industrial real estate began to heat up. I am more worried about this issue, as the Vietnamese market is not yet fully prepared to welcome the new wave of FDIs. The warming of the industrial real estate market may be due to speculation and fragmentation of FDI enterprises, and when big corporations actually come in, they may be short of land. This is a matter of caution.

I get the impression that we are not being realistic. When the new wave of FDI enters Vietnam, our capacity to receive investments has not improved yet, which will lead to serious consequences that will negatively affect the economy. The key now is to improve the capacity of the Vietnamese market and this is something to be discussed more deeply, instead of just looking at the wave of movement and see it as an opportunity. The scale of our economy is USD 300 bn, so which part of the new production supply chain will we participate in? That is the question worth thinking.

When I visited the Samsung factories in Thai Nguyen and Bac Ninh, I realized that we were relying heavily on outsourcing, more cheap labor, mostly manual labor and low-level labor. When the Covid-19 pandemic occurred, it was the time when many multinational economic groups realized this huge gap in the production chain. That is the risk when an epidemic occurs, and factories with hundreds and thousands of workers are left vulnerable to its impact and damage. Therefore, the production line in modern technology will bring automotive replacement of manual labor, which is inevitable.

- Sir, there are many opinions that FDI enterprises in logistics, retail, consumption, and technology will invest strongly in Vietnam after transferring capital from China. What is your opinion?

- I think that we should create conditions for foreign enterprises in the above sectors to invest in Vietnam. In fact, in these fields, Vietnamese enterprises can do well and also compete firmly. Here, I want to emphasize factors of production level and technology content, because this is the key factor to compete and decide who wins or loses among businesses.

- Thank you very much.

Ngoc Quang-Hoang Son (Interviewers)

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