Foreign direct investment (FDI) flows from EU countries to Vietnam have increased strongly since the EU-Vietnam Free Trade Agreement (EVFTA) took effect in August 2020.

Nearly US$23 billion

In the first 10 months of 2021, 26 out of 27 EU countries invested in Vietnam through more than 2,200 FDI projects with total registered capital of nearly US$23 billion, an increase of nearly 200 projects and almost US$1 billion compared with the same period last year despite Covid-19 complications. The Netherlands topped the list with 382 projects and total registered capital of nearly US$10.4 billion, accounting for almost 46.5 percent of

EU investment in Vietnam. France ranked second with US$3.62 billion, followed by Germany with US$2.25 billion.

In the past, EU investment in Vietnam was concentrated in high-tech industries, but has shifted in recent years to the service industries, clean energy, support industries, food processing, and high-tech agriculture. Major EU firms operating effectively in Vietnam include the Shell Group (the Netherlands), Daimler Chrysler (Germany), Siemens and Alcatel Comvik (Sweden).

Although the results of FDI attraction remain incommensurate with potential, Vu Van Chung, Deputy Director of the Ministry of Planning and Investment’s Foreign Investment Agency, said European FDI in Vietnam is of high quality and creates high added value, contributing significantly to Vietnam’s development. To get ready for investment flows from the EU, many Vietnamese localities have prepared vacant land inside and outside industrial zones, infrastructure and qualified human resources.

The northern province of Vinh Phuc is an example. According to Le Duy Thanh, Chair of Vinh Phuc Province’s People’s Committee, the locality is intensifying the attraction of FDI from Japan, the Republic of Korea, the US, and the EU, with a focus on support industries. To meet foreign investor demand, along with improving policies, Vinh Phuc is upgrading infrastructure and logistics.

Investors remain despite Covid

Nguyen Hai Minh, Vice Chair of the European Chamber of Commerce in Vietnam, said that Vietnam has many advantages in the competition with other countries for FDI, and that EU investors did not pull out of Vietnam because of Covid-19. EU investors are becoming more interested in projects that create high value in sectors such as seaports, transport infrastructure, and energy, Minh said.

Nguyen Xuan Thang, Country Manager at Schaerffler Vietnam, said the German group chose the southeastern province of Dong Nai to locate its factory with a total investment of 45 million euros in the first stage. Once Covid-19 is controlled, Schaerffler will expedite the second stage of construction to become a global manufacturing hub for a number of industrial products. “Schaerffler chose Vietnam as its investment destination because the country has many advantages in terms of human resources and investment incentives. The EVFTA will open a lot of cooperation opportunities for domestic companies and facilitate their participation in global supply chains,” Thang said.

Nguyen Thi Huong, Head of the General Statistics Office of Vietnam under the Ministry of Planning and Investment, said that to attract high-quality investment projects from the EU, Vietnam needs to pay greater attention to the transparency and stability of policies and laws. Localities should improve the quality of human resources and take synchronous measures to create a healthy, attractive and safe investment environment, she added.

Alain Cany, Chair of the European Chamber of Commerce in Vietnam: The EVFTA and the EU-Vietnam Investment Protection Agreement (EVIPA) help Vietnam attract European investors seeking a stable, safe and competitive investment destination.