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FDI investors are always interested in improving the business environment in Vietnam. (Photo: Tuan Anh/TTXVN)

FDI capital flows are more "cautious"

A survey report of FDI enterprises at the Provincial Competitiveness Index (PCI) and Provincial Green Index (PGI) in 2023 published by the Vietnam Confederation of Commerce and Industry (VCCI) recently said, the rate of FDI enterprises increasing the scale of investment capital in 2023 will reach 30.27%, a slight increase compared to 30% in 2022, the reason is that FDI enterprises are still quite cautious when considering adjusting their scale in the context of unpredictable economic developments.

Regarding the business situation, 46.49% of FDI enterprises reported profits in 2023, a slight increase compared to 42.77% in 2022. The proportion of enterprises reporting losses decreased to 42.32% in 2023, lower compared to 44.88% in 2022 and significantly lower than the record 51.33% recorded in 2021. This positive growth trajectory shows that FDI enterprises are on a steady recovery path more after the pandemic.

However, only 26% of FDI enterprises said they intended to expand their business in 2024 and 2025, down from 33% the previous year and significantly lower than the most optimistic post-pandemic level of 47.7% in 2021. Furthermore, this rate in the period from 2014 to 2019 always remained above 45%. The report said that this decline also reflects the more cautious trend of FDI enterprises due to the impact of the current unpredictable global economic context.

According to a report from the Ministry of Planning and Investment, from the beginning of the year to April 20, 2024, the total newly registered capital, adjustments and capital contributions, share purchases, and capital contributions of foreign investors reached more than 9.27 billion USD, an increase of 4.5% over the same period in 2023. However, of this, although the total newly registered capital increased by 73% over the same period, the total additional registered capital reached more than 1.23 billion USD, down 25.6% over the same period; Total registered capital for capital contribution and share purchase by foreign investors reached nearly 929.6 million USD, down 70.1% over the same period.

Along with the effects of international market fluctuations, according to experts and businesses, many foreign investors are still afraid of challenges from complying with regulations and the burden of policy implementation, thereby has influenced investment decisions and investment expansion in Vietnam. The PCI and PGI 2023 report said that, after 2018, the time FDI enterprises had to spend to carry out administrative procedures has decreased, but in 2022 and 2023, the proportion of FDI enterprises having to spend more than 5% of time spent on administrative procedures remains higher than before the pandemic.

The "key" to improvement comes from reform

For businesses from the United States, according to surveys in the PCI and PGI 2023 report, investors face more difficulties in areas related to regulations and policies, including policy and legal fluctuations; Implement administrative procedures, stabilize land use and other property rights.

For investors from China, the biggest difficulty is finding customers, followed by market fluctuations, recruiting workers and finding business cooperation partners. The biggest difficulties Japanese businesses encounter when operating in Vietnam are changes in policies and regulations, and implementation of administrative procedures.

Previously, a survey of Japanese businesses abroad at the end of 2023 by the Japan External Trade Organization (JETRO) also showed that, in Vietnam, regulations, policies and administrative procedures are the biggest obstacle to business operations. Notably, Japanese businesses operating in other ASEAN countries such as Thailand, Singapore and Malaysia have few difficulties in these areas.

For businesses from Europe, a survey published in early April 2024 by the European Business Association in Vietnam (EuroCham) showed that businesses also expressed optimism about Vietnam's economy. both in the short and long term. In the second quarter of 2024, one-third of businesses surveyed felt optimistic about development prospects, of which more than half of respondents predicted the number of orders and revenue would be higher in the second quarter. Looking to the long term, this optimism is further reinforced with 71% of businesses feeling positive about the long-term prospects in Vietnam in the next 5 years.

However, many European businesses report facing legal barriers in Vietnam, thereby hindering market entry and long-term investment. In particular, administrative burden is considered a major obstacle to establishing and expanding operations, in addition, the ambiguity of regulations also creates uncertainty and hinders strategic planning...

From the above issues, the FDI business community has raised the desire to improve the investment and business environment. For example, at a meeting with Prime Minister Pham Minh Chinh on May 9, Mr. Park Hark Kyu, General Director in charge of finance of Samsung Group, expressed his desire and belief that Vietnam will continue to improving the business environment, from which Samsung plans to invest an additional 1 billion USD per year in Vietnam in the coming time, continue to increase the number of Vietnamese businesses participating in the supply chain and promote cooperation in training human resources…

Also on this issue, according to Mr. Dominik Meichle, President of EuroCham, Vietnam has huge economic potential and resolving legal challenges is the "key" to fully realizing that potential. Simplifying procedures and establishing more transparent regulations will help facilitate both Vietnamese and foreign businesses, thereby helping Vietnam become a leading investment destination in the region, bringing profits. Benefits domestic businesses, attracts international capital and strengthens economic partnerships. Similarly, Mr. Joseph Uddo, Chairman of the American Chamber of Commerce in Vietnam (AmCham), said that high-quality foreign investment capital flows only to localities with good governance quality and good investment environment. most favorable business investment.

In addition, according to experts and businesses, to receive opportunities from the major shift in the global supply chain, Vietnam needs to continue to improve the system of policies, regulations, and reform of administrative procedures... along with paying attention to the issue of facilitating connections between foreign investors and domestic partners and customers. In addition, policymakers need to continue to accelerate policies and measures to improve the quality of local labor, especially high-skilled labor, gradually transforming Vietnam's labor structure from Mainly relying on the competitive advantage of cheap labor to high quality labor to attract foreign investment.