High-tech FDI shouldn’t be taken for granted
Electronics components are manufactured at the South Korean Young Poong Electronics VINA in the northerrn province of Vĩnh Phúc. VNA/VNS Photo Danh Lam
“I’m afraid it doesn’t look very promising,” said Nguyễn Đức Thành, director of the Vietnam Institute for Economic and Policy Research (VEPR), commenting on a claim by a former Japanese ambassador to Việt Nam that some 20,000 Japanese businesses in China were said to be on the lookout for alternatives.
Whether they go to Việt Nam, India or Indonesia or elsewhere will come down to said country’s business environment and quality of labour force, he said.
Among ASEAN countries, Malaysia, Indonesia and Thailand are countries with better industrial infrastructure. India enjoys a significant advantage of having English as a common language and a massive young labour force. Việt Nam was but one among many options.
Apple supplier Taiwanese Pegatron, for example, signed a letter of intent to invest in a $1 billion factory in Indonesia instead of Việt Nam in May. While it’s safe to assume that FDI from tech firms will continue to flow into the country in the short term, major improvements to Việt Nam’s legal framework and investment environment must take place to sway the odds in its favour.
John Chong, CEO of Maybank Kim Eng said in order to take advantage of the shifting of FDI flow from tech firms Việt Nam must make investments to improve its labour force and infrastructure. In addition, the country’s financial sector must also quickly develop and adapt to make good use of the opportunities for growth.
In early August, Japanese-Taiwanese Sharp announced the construction of a new factory in southern Bình Dương Province. In an earlier development, South Korean LG decided to move its cell phone production to Việt Nam. According to the Nikkei Asian Review, Apple will also begin trialling its AirPods wireless earphones production in the country in a move to reduce reliance on China.
Figures released by the Department of Foreign Investment under the Ministry of Planning and Investment showed a surge in foreign direct investment (FDI) in the processing and manufacturing sector with US$14.46 billion, amounted to 71.5 per cent of total FDI into the country during the first seven months of the year.