Australian investment in Vietnam only modestly

According to data from the Foreign Investment Agency (Ministry of Planning and Investment), accumulated to November 2021, Australia has 545 investment projects in Vietnam with a total capital of 1.94 billion USD. The report “Australian Direct Investment in Vietnam: An Assessment of Actual Efficiency and Policy Solutions” was carried out by a research team of Australian alumni with the support of the Australian Alumni Fund under the Australian Alumni Program. According to Aus4Skills, Australia’s FDI currently accounts for only 0.5% of the total FDI value in Vietnam and ranks 19th in the list of economies with the largest FDI in our country.

THE INVESTMENT ENVIRONMENT IS SOME LIMITATIONS

On average, Australian projects in Vietnam have a relatively small value, only about 3.56 million USD with 1 project. This value is small compared to the average value of FDI projects in Vietnam. Another finding, new FDI inflows from Australia into Vietnam are only equivalent to adjusted capital flows. Compared to the general investment situation of FDI in Vietnam, new investment flows are 2-3 times higher than adjusted capital sources. This figure shows that it seems that the Vietnamese market has not really attracted new Australian investors in recent times. Although still very modest, many people believe that direct investment from Australia into Vietnam is expected to have many growth opportunities in the near future in the context of integration into the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. Binh Duong (CPTPP) and the Regional Comprehensive Economic Partnership (RCEP). Australian businesses appreciate that the market has many favorable factors: political stability, abundant labor resources, affordable prices, the ability to control unexpected factors relatively well, the degree of openness of major economies (through FTAs)… However, the survey also shows that Vietnam’s investment environment still has some limitations. On behalf of the research team, Ms. Phung Thi Lan Phuong, Center for WTO and Integration (under the Vietnam Chamber of Commerce and Industry – VCCI), shared: Australian investors reflect on issues of corruption, bureaucracy in some agencies and local government levels is still there. In addition, the tax system has many shortcomings and lacks a highly qualified workforce. Weaknesses in law enforcement, unfair competition practices in the market… still occur. Other studies have also shown similar results. In particular, the 2020 CPI survey also shows that Australian businesses reflect that administrative procedures are still troublesome. In particular, the administrative procedures that Australian businesses invest in Vietnam are still concerned about tax procedures, fees, environmental protection, fire prevention, social insurance … Specifically, for many years, Australian investors have worried a lot about environmental protection procedures. They consider this as the biggest limitation, hindering their investment in Vietnam. Recently, many Australian businesses have invested in Vietnamese agriculture – a field with many investment procedures related to water, land, and environment… These are procedures that Australian FDIs have encountered a lot in recent via. The second issue that concerns them is having to spend unofficial costs in promoting administrative procedures, land, inspection. One of the other limitations of Vietnam’s investment environment reflected by Australian businesses is the difficulty in recruiting high-quality, high-skill workers. Most people think that finding unskilled workers is relatively easy and that is Vietnam’s strength, but workers in higher positions are very difficult.

CHANGED FROM “CONSIDERATIONS” TO “CHOICES”

However, the bright spot in the report is the higher degree of linkage between Australian businesses and Vietnamese partners compared to other regional FDIs. In particular, 50% of input into Australian FDI projects uses domestic partners who are Vietnamese individuals and businesses. The main factor that makes them choose to invest in Vietnamese businesses is the competitive price, which is more convenient to buy compared to other sources. However, they have not yet appreciated the quality and business methods of domestic partners. The study also showed that the impact of Covid-19 caused the profit of 32% of Australian FDI in Vietnam to decrease compared to the previous period, of which 20% of enterprises had profits decreased by more than 10%; 12% have a profit reduction of 5-10%. But compared with the general situation of Australian FDIs in other regions, the reduction in profits of Australian FDIs in Vietnam is smaller. 25% of Australian enterprises also plan to expand production and business in Vietnam but are relatively cautious, lower than other FDI partners in Vietnam. Explaining why Australia’s investment in Vietnam is still cautious, Mr. Simon Pugh, Chairman of the Australian Chamber of Commerce in Vietnam, said that many Australian businesses still lack information about Vietnam. Therefore, it is necessary to promote investment from Australia into Vietnam through a more comprehensive approach between the governments of the two countries and the private sector, such as introducing investment opportunities in Vietnam, investment marketing. in Viet Nam. Besides, Vietnam needs a simple investment roadmap. It is recommended that VCCI or government agencies develop a simple step-by-step process to guide investment activities. According to Dr. Uwe Kaufmann, Senior Lecturer at the Australian Institute of Business (AIB), a survey of Australian FDI in Vietnam showed that 48% of Australian businesses rated Vietnam as very potential and they would consider investing in the near future. . They believe that for Australian businesses to choose to invest, Vietnam needs to comprehensively reform the public sector, regularly review domestic laws and regulations, fully implement international commitments on investment, and create a favorable environment. fair and transparent business for foreign investors including Australian investors. At the same time, implement commitments made in trade agreements. Both agreements contain investment regulation chapters, investment chapters following the best practices of next-generation trade agreements, and investment chapters providing a solid legal foundation for creating more opportunities for Australian investors. What matters is that those platforms and best practices are in place. “Vietnam needs to regularly evaluate its laws and regulations with the questions: Do they achieve their goals? Do they follow international best practices? Do they facilitate business and investment? On the other hand, Vietnam needs to provide up-to-date, easily accessible information on laws, regulations and opportunities for investors,” recommended Dr. Uwe Kaufmann. Nguyen Anh Duong, Head of the General Research Department, Central Institute for Economic Management and Research (CIEM), said that Vietnam should consult and learn from international experiences in attracting policies and promoting activities. advance foreign investment. For example, in the context of the global epidemic, Vietnam can increase investment attraction in the fields of health and digital technology, accelerate digital transformation in investment promotion, and study an open approach that is suitable for the health sector. suitable for foreign investors… As for the Government, according to Ms. Phuong, the Government needs to focus on a number of solutions such as promoting administrative reform; strengthen control of corruption; improve the quality of labor resources; promoting information and investment promotion activities; strengthen dialogue with foreign investors; support connection with domestic partners. Australian investors should actively increase their search for information about Vietnam and the business environment in Vietnam; strengthen linkages to improve the effectiveness of policy advocacy; further increase connections with domestic partners. Sources: https://en.vneconomy.vn/australian-investment-in-vietnam-only-modest.htm