Attracting High-Tech FDI is the New Trend

With the recovery of foreign direct investment (FDI) inflows, Vietnam is increasingly prioritizing attracting high-tech FDI.

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With foreign direct investment (FDI) inflows recovering strongly, Vietnam is increasingly prioritizing attracting high-tech FDI.

Bright spots in FDI attraction

In 2023, Vietnam’s FDI attraction is rebounding strongly, approaching pre-Covid-19 levels. In 2024 – the breakout year of the 2021-2025 economic period, right from the beginning of the year, foreign direct investment activities in Vietnam were very vibrant with multi-million-dollar projects. According to the Foreign Investment Agency, in January 2024 alone, Vietnam attracted over $2.3 billion in FDI, up 40.2% compared to the same period in 2023; the realized capital of foreign investment projects is estimated at about $1.48 billion, up 9.6% compared to the same period in 2023.

Not only increasing in terms of attracted capital, but international organizations also evaluate Vietnam as emerging as a bright spot in attracting FDI in new investment areas such as semiconductors, artificial intelligence, and high-tech industries… HSBC Global Research Department even assesses Vietnam as one of the three outstanding countries in ASEAN in attracting FDI in the technology sector (along with Singapore and Malaysia). This trend brings hope for Vietnam’s recovery as the economic cycle changes.

Speaking of European investors specifically, Mr. Nguyen Hai Minh, Deputy Chairman of the European Chamber of Commerce in Vietnam (Eurocham), stated that in a recent survey, European enterprises not only ranked Vietnam among the top 10 leading investment destinations in the world, with nearly 20% of surveyed managers placing Vietnam at the highest priority. European businesses are confident in implementing their investments in Vietnam in technology and finance sectors, to name a few.

As evidence of this attractiveness, right after the 2024 Lunar New Year, Trina Solar – a major solar energy company, decided to invest in a production project with a total investment capital of $454.4 million and is expected to officially operate in March 2025. Meanwhile, Hana Micron (South Korea), a company specializing in packaging and testing of semiconductor materials, has completed phase 2 and increased its total investment level in Vietnam to $1 billion; LG Innotech (Hai Phong) has invested an additional $1 billion in expanding production projects for electronic products; and Chinese company Shenzhen MTC has registered a total investment capital of $24 million to produce routers, digital signal converters, LED lights, and televisions.

According to Associate Professor Dinh Trong Thinh, an economic expert, this is an opportunity for Vietnam to promote the use of high technology, apply new labor productivity, and completely change the production structure in Vietnam. This expectation is entirely grounded by Vietnam signing 17 Free Trade Agreements (FTAs) with many countries around the world, being among the top 20 countries with the highest growth rates in the world in 2023, especially with political stability and consistent economic growth for decades at a high level…

Enhancing solutions to attract high-tech FDI

Strengthening the attraction of foreign investment into high-tech industries is the current strategy followed by many localities. Mr. Hua Quoc Hung, Head of the Export Processing and Industrial Zone Authority (Hepza) of Ho Chi Minh City, said that the city will prioritize attracting investment projects in high-tech industries, clean industries, projects producing high-value-added products, and environmentally friendly projects. Investment projects with low investment capital, outdated technologies, and labor-intensive projects will be restricted.

Similarly, the Khanh Hoa Provincial People’s Committee has just issued a decision approving the 2024 Investment Promotion Program, which focuses on attracting selective investment projects that utilize land and energy efficiently, adopt high technology, environmentally friendly, have high value-added, and contribute to rapid and sustainable socio-economic development.

Nationwide, Minister of Planning and Investment Nguyen Chi Dung stated that Vietnam will actively attract and cooperate with foreign direct investment, emphasizing quality, effectiveness, technology, and environmental protection; giving priority to projects with high added value, high technology content, with links to domestic enterprises, and having spillover effects, connecting production and global supply chains, specifically in electricity, electronics, semiconductors; renewable energy; high-efficiency agriculture; digital economy, digital transformation; innovation, research, and development; and financial centers…

However, alongside the good news, there are also many challenges to be concerned about. An expert explained that there is a shortage of highly skilled technological labor, which cannot meet the immediate needs of large corporations; investment in high-tech has been limited to assembly, packaging, and simple manufacturing; the global minimum tax began its implementation in Vietnam this year, when it is applied, all multinational corporations will be subject to a minimum tax rate of 15%…

Regarding the global minimum tax, an expert sees it as a challenge in terms of competitive advantages but also an opportunity for Vietnam to upgrade its FDI attraction strategy. Mr. Nguyen Van Toan, Deputy Chairman of the Association of Foreign-Invested Enterprises, believes that to adapt to the new regulations, Vietnam will have to improve its investment environment, high-quality human resources to attract high-tech, advanced technology, foreign investors. The important thing is to elevate Vietnamese businesses to cooperate with foreign enterprises, participate in the value chain to increase profits. Domestic human resources and technology will also be enhanced accordingly.

SOURCEcafef
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