Vietnam needs to reorient its advantages from FDI attraction

World Bank expert: Vietnam needs to redefine the benefits from FDI attraction

The big challenge for Vietnam is not attracting more FDI or integrating more deeply, but more importantly, making good use of that capital flow.

Jacques Morisset, Chief Economist, World Bank in Vietnam speaks at the Reform and Development Forum (VRDF) 2020. Photo: Duc Thanh

According to WTO estimates, global trade is estimated to decrease by 13-35% in 2020, even if the economy recovers in recent months, while FDI in the world will also decrease by 40% according to calculations of the Conference. United Nations for Trade and Development (UNCTAD).

However, the current situation also creates new opportunities for Vietnam, according to TS. Jacques Morisset, Chief Economist, World Bank in Vietnam at the Forum on Reform and Development (VRDF) 2020 organized by the Ministry of Planning and Investment on September 29 in Hanoi.

The risk of a supply chain disruption could accelerate the movement of multinationals from China to Vietnam, although this trend was in the foreground before Covid-19, when labor costs were involved. in China soaring and tariffs in the US-China trade war.

Meanwhile, statistics on Vietnam’s economy show that Vietnam is doing quite well in dealing with the Covid-19 epidemic and taking advantage of the domination of Covid-19. “I think Vietnam should plan ahead, define priorities for the long term, priority in the medium term, and must quickly win and drive change from there,” noted Mr. Morisset.

Vietnam is wise to use its advantages. For example, Vietnam has controlled the Covid-19 well and wants to attract more investors to Vietnam and promote trade. In addition, since the appearance of Covid-19, the digital transformation process in Vietnam has been faster in many aspects, from e-payment, e-commerce to e-government. Not to mention, Vietnam has an open door policy deep integration Wide through free trade agreements, most recently the Vietnam – EU Free Trade Agreement (EVFTA) and this is one of the “wise” things of Vietnam without any further clarification.

New opportunities for Vietnam also come from the trade agreements that Vietnam has been participating in, because while Vietnam participates in integration, promoting trade, in other parts of the world, barriers Trade barriers are on the rise.

Accelerating domestic reforms, especially in the field of digitization and improving the business environment, could help Vietnam become a more attractive destination, he said. “I think the Government has recognized the need to change its strategy. The big challenge for Vietnam is not attracting more FDI or integrating more deeply, but more importantly, making good use of that capital flow”.

Vietnam’s great success in attracting FDI for decades is creating millions of jobs. However, looking to the future, there will be a tendency to limit old, labor-intensive factories. We will not see many workers in factories but robots instead, World Bank experts warn. Furthermore, it will be increasingly difficult to solve the problem of employment from FDI attraction and manufacturing. Covid-19 has clearly shown this trend.

Not to mention, the technological breakthroughs have and are in danger of reducing the need for low-skilled labor in manufacturing. Evidence in Vietnam, there are investors in Vietnam within 10 years whose output doubled but the labor force decreased 40%, while in the world, the analysis shows that from the early 1990s up to now, Labor intensity in the electronics industry has halved.

So, TS. Jacques Morisset recommended Vietnam needs to reorient the benefits from FDI attraction, not only job creation but deeper participation in the value chain.

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