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Vietnam needs reform to retain FDI firms: economist

Vietnam needs reform to retain FDI firms: economist

Tuesday, November 14, 2023, 22:04 GMT+7
Vietnam needs reform to retain FDI firms: economist
The Intel factory in the Saigon Hi-Tech Park in Ho Chi Minh City. Photo: H.D. / Tuoi Tre

Vietnam should boost administrative reforms and issue more effective policies to attract and retain foreign direct investment (FDI) enterprises amid news reports about U.S. technology company Intel’s plan to shelve an investment for expansion in Vietnam, according to local economist Huynh The Du.

Intel’s investment in Vietnam is a successful project and its further operation in the Southeast Asian country in the near future is obvious, Dr. Du said.

However, the results of Vietnam’s establishment of the Saigon Hi-Tech Park and the country's issuance of great incentives to attract Intel and other FDI projects have not been as expected, he remarked.

Nevertheless, the current global economic downturn and domestic issues are great challenges for retaining existing projects and wooing more foreign investments from Intel as well as other FDI enterprises if the country does not come up with breakthrough solutions.

In reality, current FDI projects have less connectivity with the local economy.

The operations of Intel Products Vietnam, the Vietnamese business of the U.S.-based chipmaker, and many other FDI firms are basically within their factories, along with some social activities.

This was shown clearly through Intel’s newly-released data and a report on its 10-year investment in Vietnam made by the Fulbright Vietnam University, Dr. Du said.

The added values that Vietnam is entitled to, including laborers’ salaries and taxes, are lower than one percent of FDI firms’ exports. The country mainly takes charge of assembly.

Just a few domestic enterprises provide simple services, such as packaging, catering, and security.

Meanwhile, neighboring China has developed its ecosystems to retain foreign enterprises with the foundations of a developed country.

In reality, foreign firms producing hi-tech products need spaces, a stable power supply, and a qualified workforce.

Also, the country needs to improve its infrastructure and train high-quality manpower.

Vietnamese military-run telecom group Viettel recently recruited a mere 100 out of 2,000 students graduating with excellent academic records, suggesting problems in the education system, according to Dr. Du.

Furthermore, there is a trend that high-skilled laborers tend to move to other countries. Vietnam's two largest cities are facing a shortage of infrastructure, while the state apparatus does not work quickly and effectively for fear of making mistakes.

Many other emerging markets are willing to make that bet while developed countries have better conditions.

As a result, if Vietnam does not accelerate its reforms, it will find it hard to retain FDI firms.

Intel’s latest investment was in January 2021 with US$475 million and its total capital in the Southeast Asian country, at $1.5 billion, is less than one percent of the firm’s investments announced over the past two years, at $157 billion, including $7 billion channeled into Malaysia, Dr. Du said.

Vietnam should take notice that Intel closed its factory in Costa Rica despite previous promises.

It should act to have a firm position like China and other successful countries instead of being a middle-income country as at present.

Reuters reported last week that Intel shelved a planned investment in Vietnam that could have nearly doubled the U.S. chipmaker's operation here, citing one person briefed on the plans.

The source told Reuters that Intel had made that decision around July.

A second source who attended two separate meetings in recent weeks between U.S. companies and top Vietnamese officials told the news agency that Intel had raised concerns about the stability of power supplies and excessive bureaucracy.

In response, Nguyen Anh Thi, head of the management board of the Saigon Hi-Tech Park in Ho Chi Minh City, said Intel Products Vietnam had yet to make an official announcement on changes to its expansion plan.

Intel Products Vietnam is still operating as normal at its factory in the Saigon Hi-Tech Park.

A representative of Intel Products Vietnam refused to comment on the accuracy of the news, saying that Vietnam will continue to be a critical part of Intel’s global manufacturing operations.

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Tuoi Tre News


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