HSBC: Identifying Vietnam's "bottleneck" in attracting FDI

A recent report by HSBC Bank stated that ASEAN is attracting increasingly more FDI, notably in the manufacturing sector. China itself is also building supply chains in neighboring countries like Vietnam, a trend that HSBC strongly supports in various markets.

Identifying Vietnam's "bottleneck" will help us attract FDI more effectively (Source: Collected)

According to HSBC Vietnam, the government's strategy in attracting more FDI to Vietnam should begin with understanding and assessing the competitiveness between Vietnam and other countries in ASEAN, as well as evaluating other markets such as India or Mexico.

Singapore and Malaysia lead the semiconductor ecosystem, with Singapore being the hub for semiconductor wafers and manufacturing equipment, while Malaysia specializes in packaging and testing. Thailand has become an automotive supply chain and a supplier for electric vehicles. Indonesia is targeting the electric vehicle ecosystem with abundant nickel resources and a large domestic automobile market.

Vietnam is also gradually developing both the electric vehicle and semiconductor markets by focusing more on high-value-added goods while still maintaining momentum in attracting major electronics manufacturers to the market due to competitive prices, stable and consistent government support, effective FTAs, and the working attitude of Vietnamese people.

Therefore, identifying the most significant hurdles for foreign investors will help Vietnam formulate the most comprehensive and feasible action plan.

HSBC experts believe that there are three issues Vietnam needs to improve in attracting FDI.

Firstly, the quality and accessibility of the labor force, as well as the continuous need to improve productivity as Vietnam strives for higher quality. Vietnam still lags behind other major ASEAN markets in labor productivity with relatively low output per hour worked at 9.7 compared to 10 - 26 in other ASEAN countries.

Secondly, Vietnam's logistics efficiency index also lags behind China, Malaysia, and Thailand with many deficiencies in logistics capacity, delivery times, traceability, etc. The logistics infrastructure does not meet international standards, and road transport accounts for up to 74% of total transport while demand leans towards maritime and port transport, which has supported Vietnam's exports.

Finally, the ability to adapt to the legal environment continues to be an important factor for investors seeking opportunities in Vietnam.

According to the latest HSBC Global Connection survey, legal changes are one of the two biggest challenges for foreign businesses operating in Vietnam, with 30% of surveyed companies mentioning difficulties in adapting to rapidly changing policies and regulations.

Establishing a stable and easily applicable legal framework will be a positive step in attracting more participants to invest in the market.

HSBC will continue to leverage its international network to support customers in understanding and capturing opportunities in the Vietnamese market. The bank can also help build a clear goal-oriented approach to engage multinational corporations directly at their headquarters or regional offices to introduce the "Vietnam story".

Additionally, HSBC can collaborate with ministries and sectors to promote Vietnam as an investment destination, support the development of legal frameworks to manage investment activities and business operations in Vietnam, and especially assist Vietnam in balancing emissions.

The HSBC report emphasizes: "Green factors are becoming increasingly important for foreign investors in the process of selecting investment markets."

(Minh An/doanhnghieptiepthi.vn)