Attracting investment to Vietnam through RCEP

Attracting investment to Vietnam through RCEP

Existing investment trends in Vietnam are expected to intensify as a result of the Regional Comprehensive Economic Partnership (RCEP), according to an international business expert from RMIT University.

Signed on 15 November 2020 by 15 member countries including Vietnam, the RCEP aims to broaden existing opportunities in goods and services, and provide investment protection measures which will help reassure would-be investors.

RMIT University International Business Senior Program Manager Dr John Walsh said that the agreement will likely attract investment into already successful areas, as well as new investment in related areas.

“That means there will be more manufacturing and assembly work from Japan and South Korea and relocation of some industrial activities from China,” he said.

“More investment in the energy sector is also likely, with Thai firms already busy in buying up Vietnamese capacity in solar power.”

news-thumbnail-attracing-investment-through-rcep The RCEP aims to broaden existing opportunities in goods and services, and provide investment protection measures which will help reassure would-be investors.

Dr Walsh said that with the provision for services and further investment protection offered by the RCEP, investor interest in the finance and insurance may surge, as well as the food and supermarket retail sectors.

“Eventually, I hope that the Government will have enough faith in the national retail and distribution system to open the country further to foreign investment in this industry,” Dr Walsh said.

“Not only will this provide more opportunities for the consumer but it will also offer opportunities for local farmers to be included in regional and global value chains.”

Securing high-quality FDI inflows

In order to make sure that the incoming foreign investment is of high quality, “Vietnam needs to focus on three main areas”.

The first area, according to the RMIT academic is infrastructure, which includes transportation infrastructure and telecommunications connectivity. The second is education, to bring more skills and capacity into the workforce.

“There is already a shortage of skilled labour so the government might try to think of ways to incentivise people to attend vocational schools rather than universities,” Dr Walsh said.

“The skills and knowledge that Vietnamese students learn from overseas universities should also be used in the local economy whenever possible.”

The third focus area is the issue of the ‘missing middle’; there are very few businesses in Vietnam that fall into the middle category of 25-100 employees, and a departmental structure.

“When investing firms decide where to put their money, they want to find places where local firms can be trusted to provide local supplies and services such that they can join supply chains. However, there is a lack of such firms in Vietnam and so incoming firms have to invest further in providing their own supplies and services,” Dr Walsh explained.

“Ways should be found to encourage small firms to increase their size so as to be able to tender for jobs with inwardly investing firms.”

Dr Walsh added that firms should also prepare to take advantage of ‘Thailand plus one’ or ‘China plus one’ strategies, where companies do the more advanced parts of production or assembly in the first country and less advanced activities in another country.

“This will require good transportation and no needless tariffs or barriers to cross-border movement of intermediate goods,” he emphasised.

Story: Ngoc Hoang

12 January 2021

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