FDI enterprises are on the way to stable recovery

FDI enterprises are on a stable recovery momentum, business activities flourish. Illustration: H.D

Nearly 43% of FDI enterprises reported profit

The Provincial Competitiveness Report (PCI) 2022 has stated that foreign-invested enterprises (FDI) are on a stable recovery track after the pandemic with positive business activities. While 2021 saw the rate of FDI enterprises reporting profits at a record low of 38.72%, by 2022, this rate has increased significantly to 42.77%.

However, in the context of unpredictable global market fluctuations, FDI enterprises are being cautious about their expansion plans. Only 6.24% of FDI enterprises participating in the survey said they had increased their investment capital in 2022, the lowest level since 2014.

The “thermometer” of FDI enterprises shows that 33% of FDI enterprises plan to increase their scale in the next year. This is a sharp decrease compared to 47.7% in 2021 and much lower than the pre-pandemic level, this number has never dropped below 45% in the period from 2014 to 2019.

Source: PCI 2022 (The thermometer chart of FDI enterprises)

In fact, in the first quarter of 2023, the total registered foreign investment capital into Vietnam reached USD 7.8 billion, down 19.3% over the same period last year. Realized FDI in Vietnam in the first three months of 2023 was estimated at USD 4.32 billion, down 2.2% over the same period last year.

However, FDI enterprises still place high expectations on the prospects and recovery of Vietnam's economy. According to the Doing Business Index (BCI) report based on a survey of 1,300 members of the European Business Association in Vietnam (EuroCham), the BCI index in the first quarter of 2023 remained stable at 48.0 points, but there are already promising signs of a positive change in the economic outlook of the European business community.

Mr. Gabor Fluit, President of EuroCham, said that member businesses are feeling positive about the future of Vietnam's economy with the expectation that the upcoming reforms to work permit and tourist visa procedures will be able to have a direct impact on growth. In addition, the Government's solutions to improve liquidity and access to finance will also boost the spirit of the business community.

Similarly, Mr. Steven Cranwell, General Manager of the Americas and Regional Director of Corporate Banking for the Americas, Standard Chartered Bank, said that despite uncertainties in the global economy, the US businesses still believe in Vietnam's prospects thanks to its friendly business environment, strategic location as a gateway to other fast-growing markets, abundant and skilled labor, and competitive labor costs and many preferential policies.

According to a survey by Standard Chartered, 92% of 500 business leaders in the US currently have plans to expand their business in the ASEAN region, and 51% of them currently have plans to invest in manufacturing in Vietnam. In addition, Vietnam is participating in many Free Trade Agreements (FTAs), so it also supports Vietnam in the process of participating in the world and regional supply chains, and at the same time, helps businesses operating in Vietnam diversify and access more markets with favorable conditions.

Promote improvements in administrative procedures and infrastructure

In the general assessment of Vietnam's business environment, the survey results of FDI enterprises show that the burden of regulatory compliance has decreased to nearly the level before the pandemic; among enterprises that responded to the PCI-FDI 2022 investigation, not a single enterprise was unduly audited.

Moreover, administrative procedures in the fields of social insurance, investment registration, business registration and import and export are assessed to have improved significantly. Informal costs have continued their downward trend in recent years.

However, FDI enterprises still reflect that some areas need to continue to promote administrative procedure reform; the improvement of infrastructure shows signs of slowing down in 2022 and needs more attention. Notably, the quality of human resources has not yet met the needs of employers. FDI enterprises still face difficulties in recruiting workers, especially for positions requiring high qualifications such as managers and executives.

Mr. Steven Cranwell said that American businesses want Vietnam to improve infrastructure, especially ports, transport infrastructure and the capacity of the logistics industry to maintain growth. Moreover, Vietnam needs to reduce its dependence on raw materials from China because it can reduce the diversification efforts of enterprises.