Transnational companies will pour large funding into hi-tech projects in Vietnam as giants have done over the past decade because the TPP will open up trade opportunities between Vietnam and other 11 nations, which will, in turn, be a catalyst for foreign investment, foreign and domestic economists have said.
In comparison with China and non-TPP Southeast Asian countries, Vietnam has large potential to attract investment in the high-tech sector, stepping up its integration in the global supply chain, according to the Peterson Institution for International Economics.
Vietnam saw an influx of technology giants such as Samsung, LG, Microsoft, Bosch, Nidec and Jabil into Vietnam a decade ago. This wave has reemerged recently as many of them have chosen Vietnam as their global manufacturing bases.
Samsung Display Co., Ltd, a unit of Samsung Group, has won a license to pour an additional $3 billion into a display manufacturing factory in the northern province of Bac Ninh. With the amount, Samsung has raised its investment in Vietnam to $14.2 billion.
Intel is among large U.S. investors in the Southeast Asian country with several projects, including a chip manufacturing plant. Microsoft plans to scale up its investment in the northern province of Bac Ninh to $1.5 billion from $150 million.
Jabil has pledged to invest an additional $500 million into a facility in Ho Chi Minh City, the country’s largest metropolis. Microsoft and LG are planning to move their manufacturing lines into Vietnam, according to the Ministry of Planning and Investment-run Dau Tu (Investment) newspaper.
The Pacific Rim trade deal is hoped to lead to a surge in investment flow from the U.S. into Vietnam, following a colossal upturn in bilateral trade over the past years, said Prof. Nguyen Mai, chairman of Vietnam’s Association of Foreign Invested Enterprises (VAFIE).
TPP offers huge opportunities for Vietnam, but Vietnam needs to overcome challenges by carrying out legal and institutional reforms. “Customs procedures have been streamlined recently, but foreign and domestic businesses still complain of cumbersome paperwork and corruption”, Mr. Mai stresses.
In addition, Vietnam needs to handle violations of intellectual property rights. “Although Vietnam has regulations on intellectual property, Vietnam will find it hard to lure foreign investors if intellectual property violations are not strictly dealt with,” Mr. Mai warned.
A EuroCham manager in Vietnam pointed out that protecting intellectual property rights is much needed to encourage FDI in Vietnam. Violations and the enforcement of intellectual property rights remain a common concern for European businesses although Vietnam has improved the legal framework regarding this aspect.
Planning and Investment Minister Bui Quang Vinh has reiterated that Vietnam accepts challenges when joining free trade agreements so as to expand its markets.
“However, to turn its wishes into realty, [Vietnam] needs to reform the economic institution as well as the legal system to fit international practices, and accept competition and investment expansion as well,” Mr. Vinh noted.