EU investment disproportionate to potential

Investors from EU countries so far have invested in 1,959 projects in Vietnam with total registered capital of more than US$21.56 billion, accounting for 8.5 percent of the total number of foreign direct investment (FDI) projects in the country and 7.2 percent of the total amount of registered capital. These results are said to be incommensurate with the potential of both sides. However, economists believe there will be opportunities for Vietnam to attract more FDI from the EU. 

Untapped potential

According to the Ministry of Planning and Investment (MPI), EU investors have invested in 19 sectors of the Vietnamese economy, focusing on processing, manufacturing industries, electricity generation and distribution, and real estate.

Processing and manufacturing industries top the list with 630 projects with total registered capital of about US$8 billion, accounting for 32.2 percent of the total number of EU investment projects and 34.7 percent of the total amount of registered EU investment capital in Vietnam. Electricity generation and distribution ranks second with US$3.2 billion, accounting for 14.8 percent of the total, and real estate third with US$2.5 billion, 11.9 percent.

Fifty-four out of 63 provinces and cities nationwide have attracted FDI from the EU. Ho Chi Minh City and Hanoi have been the two most attractive destinations to European investors. Ho Chi Minh City has attracted 799 projects with total registered capital of US$3.6 billion, accounting for 40.7 percent of the total number of projects and 17.1 percent of the total amount of registered capital; Hanoi has attracted 436 projects with total registered capital of US$3.6 billion, accounting for 22.2 percent of the total number of projects and 17.1 percent of the total amount of registered capital. Ba Ria-Vung Tau, Quang Ninh and Dong Nai provinces have also attracted the attention of European investors.

The MPI said EU investment in Vietnam has been effective and compliant with Vietnamese law. However, investment results remain incommensurate with the potential of the relations between Vietnam and EU countries. Moreover, EU investment is concentrated mostly in major cities and provinces with infrastructure and labor advantages, such as Ho Chi Minh City, Hanoi, Quang Ninh and Dong Nai. The Netherlands, the UK, France, Luxembourg and Germany are the top five EU investors in Vietnam, accounting for 71.7 percent of the total number of projects and 83.1 percent of the total amount of registered EU investment capital in Vietnam.

Big opportunities

According to the MPI, EU investment in Vietnam has increased strongly in recent years and is forecast to continue growing. This forecast was made in the context of the EU-Vietnam Free Trade Agreement (EVFTA) set to take effect in 2018. EVFTA is a high-quality and comprehensive agreement that ensures balanced benefits for both sides and includes a new approach on investment protection and investment dispute settlement. The agreement therefore is expected to provide Vietnam with major opportunities to attract more FDI from the EU.

Despite advantages including political stability and low labor costs, European investors still see many problems in the Vietnamese investment environment, such as the inconsistency of policies, underdeveloped support industries and inadequate infrastructure. Therefore, to attract EU investors, Vietnam needs to further improve the investment environment, infrastructure, regulations and policies.

Nguyen Hoa / baocongthuong