Comprehensive Orientation for Attracting Foreign Direct Investment in Vietnam
In late November, officials from the Central Commission for Policy and Strategy shared details regarding a draft resolution from the 14th National Party Congress. This new approach is set to reshape Vietnam’s strategy for attracting Foreign Direct Investment (FDI), aiming for a more selective and impactful methodology.
Focus on Selective Attraction of Projects
The resolution sets forth clear priorities, emphasizing the need to attract high-tech and low-emission projects. The intention is to move away from simply inviting any foreign investment to focusing on projects that can significantly uplift the domestic economy. This strategic shift includes improving technology transfer, management skills, and human resources training. The goal is to enhance collaboration between foreign-invested enterprises (FIEs) and local businesses, thereby increasing local content in the supply chain.
Current Challenges in Localisation Rates
Nguyen Duc Hien, the deputy head of the Central Commission for Policy and Strategy, highlighted a pressing concern: the weak links between FIEs and domestic firms. Currently, the localisation rate of FIEs is alarmingly low, sitting at only about 20-25%. This translates to a considerably lower contribution of FIEs to the domestic value-added content in exports compared to neighboring East Asian and Southeast Asian countries.
The underwhelming level of technology and tech transfer remains a significant hurdle. Many corporations operating in Vietnam are still engaged primarily in assembly and processing roles, which tend to be labor-intensive and offer minimal potential for generating technology spillovers. Furthermore, the current number of projects focusing on high-tech, green, or environmentally friendly technologies is falling short of established targets.
Case Study: Bac Ninh’s Industrial Hub
Bac Ninh has emerged as a notable example of successful foreign investment in Vietnam. The province hosts several global tech giants like Samsung, Foxconn, and Luxshare-ICT, all of whom are expanding their operations. This growth has allowed many local firms to participate actively in the supply chain by offering essential services such as labor recruitment, hospitality, and electronic components.
Encouragingly, some domestic businesses are beginning to invest in innovative strategies that facilitate connections with foreign partners. Hien pointed out that this trend opens up new opportunities for these companies to enhance their competitiveness and gradually integrate into the global value chain. However, the number of local enterprises capable of supplying high-tech products remains modest, indicating more work is needed.
Innovative Partnerships: GG Industries and Goldwind Group
A notable partnership was formed at the beginning of December between GG Industries and Goldwind Group. Together, they are developing high-tech battery energy storage capabilities in Vietnam. Under their agreement, Goldwind will transfer comprehensive manufacturing technology to GG Industries and provide a production line with a 5GWh annual capacity dedicated to energy storage applications in various sectors.
This partnership promises to be a game-changer, as Goldwind commits to providing ongoing technical support. This includes training for engineers, operational assistance, and continuous upgrades to meet evolving global standards in energy storage technology.
Challenges in Quang Ninh Industrial Parks
Despite progress, challenges persist. The Quang Ninh Industrial Park Management Board recently reported issues such as low localisation rates and a shortage of specialized supporting industries. Most supporting products remain simple components, lacking both technological depth and value-added content.
The board indicated that industry linkages among enterprises are still underdeveloped, with limited horizontal and vertical integrations. This gap hampers overall production efficiency and restricts collaborative efforts to share resources and technology.
Proposed Solutions to Enhance Investment Attraction
To effectively implement the resolutions from the 14th Party Congress, local authorities and businesses recognize the necessity of proactive measures. Truong Manh Hung, head of the Quang Ninh Industrial Parks Management Board, suggested refining the legal and policy framework for investment.
A new investment incentive strategy should focus on attracting “new-generation” foreign investments geared toward clean industries, high technology, semiconductors, AI, and innovation. Additionally, drafting a national guidance framework to screen foreign investors and implement consistent audit and evaluation mechanisms could help manage incoming investments more effectively.
Such measures would not only enhance transparency and efficiency but would align the results from capital inflows with actual project outcomes. The goal is to ensure that Vietnam attracts investments that not only contribute economically but also enrich the fabric of local industries and communities.