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Local businesses should prepare for new wave of foreign funding

Update: March, 30/2015 - 09:49

Hai Quan (Customs) newspaper spoke to Nguyen Van Toan, vice chairman of the Foreign Investment Business Association, about a new wave of foreign investment.

Can you bring us up to speed on the current status of foreign investment capital flow?

This year, foreign investment capital in Viet Nam is likely to be positive. This is because of the very strong likelihood of the country signing free trade agreements (FTAs) with the European Union (EU) and Australia, the Trans-Pacific Partner (TPP) agreement with the Russia-Belarus-Kazakhstan Customs Alliance of Russia, and especially owing to the establishment of ASEAN Economic Community by the end this year.

Since 2013, several international businesses, such as Microsoft, Samsung and Nokia have invested capital in Viet Nam.

As per my observations, many American investors are also interested in the Vietnamese market, especially the electronics sector. They are ready and just waiting for the Government to approve their entry. I have heard that many American investors are even planning to move their factories from other countries to Viet Nam.

Also, European investors intend to invest in Viet Nam. In the past, EU had offered Viet Nam multilateral trade assistance. But since 2004, it has proposed to start multiple investment projects in the country.

To take advantage of the opportunities arising from when Viet Nam signs TPPs on textiles, garments, leather and footwear, many Korean and Chinese businesses, have also planned to set up their factories in Viet Nam and export their products to TPP member countries.

Obviously, opportunities for Vietnamese enterprises are very big, but the risk of being used by foreign businesses is also high.

What should Vietnamese businesses do to avoid the risk?

Vietnamese businesses must try harder. The fact is that if we import raw materials for textile and garment production from non-TPP countries, they will not be granted any tax breaks. But if we import materials from TPP countries, these businesses will not be able to earn high profit because of the expensive materials used.

So, the only way is that Vietnamese enterprises have to manufacture raw materials to reduce the production costs.

The Government and businesses have understood the issue properly and acknowledged that this is a war between foreign and domestic businesses. But how can this problem be handled is another issue. At present, the Vietnamese Government is still encouraging foreign investors in the country because of the mutual benefits entailed.

How do you evaluate the challenges that will be faced by Vietnamese businesses when the ASEAN Economic Community (AEC) is established?

When the AEC is established, goods, labour forces and services will move more freely. This brings both challenges and opportunities for Vietnamese businesses. When competing freely, the current weaknesses of Vietnamese businesses would be the hardest challenge to overcome.

During the initial days of entering the Vietnamese market, foreign businesses would easily win. But Vietnamese firms would also have to gradually adapt to the new rules to survive.

When international businesses forayed into Viet Nam, it presented big opportunities for the supporting industry. But in fact Viet Nam's businesses are yet to meet that demand. What do you think about this?

That is right. Viet Nam's supporting industry has not yet met the demand of foreign enterprises. So when foreign businesses invest in Viet Nam, they also bring along the supporting industry.

Recently, Samsung built a factory in southern Viet Nam and asked for tax incentives. In my opinion, if the government maintains such incentives, we should ask foreign companies to commit to a technology transfer to Vietnamese businesses to develop the supporting industry. That would help effectively attract greater foreign direct investment flows.

When the supporting industry is developed, Vietnamese products would also see higher added values and the domestic human resources would be effectively used.

We recently collected taxes and fees from foreign companies. Saying that does not mean we did not encourage foreign businesses to come to Viet Nam. Their presence has truly pressured Vietnamese businesses and forced them to survive and evolve. — VNS

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