VietNamNet Bridge - While Vietnam needs foreign capital to develop the economy, it also requires advanced technologies to become involved more deeply in the global supply chain.

            The FDI capital would exceed the $30 billion threshold by year end

At a meeting with Japanese investors recently, director of the Binh Duong Planning and Investment Department Nguyen Thanh Truc said foreign investors pledged to invest $2.171 billion in the province this year.

Meanwhile, HCMC is leading the country in FDI (foreign direct investment) with total committed capital of $5 billion this year.

According to the Foreign Investment Agency (FIA), from the beginning of the year to October 20, the total newly registered investment capital reached $28.24 billion, up by 37.4 percent. 

Experts believe the FDI capital would exceed the $30 billion threshold by the end of the year. Prior to that, FIA predicted that Vietnam would attract $28 billion worth of FDI in 2017. 

HCMC is leading the country in FDI (foreign direct investment) with total committed capital of $5 billion this year.

However, the figures about capital committed by foreign investors now seem to be less significant than the amount of capital disbursed and the technologies foreign investors plan to bring to Vietnam.

Vietnam needs high technologies which could help it improve competitiveness and upgrade product value. 

A World Bank report on strengthening competitiveness and cooperation among small and medium enterprises (SMEs) commented that Vietnam’s joining global value chains through foreign invested enterprises (FIEs) has brought remarkable benefits in terms of GDP growth and jobs. 

In the process of positioning itself as a production and export center, Vietnam focuses on assembling, the final stage of the production chain which requires a high number of workers. Many products have high export value, but the domestic added value is low, so the contribution to the national economy is not high.

This shows the limited penetration by SMEs into global value chains by becoming a component supplier to international manufacturers. Vietnamese enterprises only provide low added-value products such as packages and simple parts.

Charles Kunanka from the World Bank (WB) commented that most of the works that bring high added value such as designing and core component products are done outside Vietnam.

He said Vietnam is stuck at the ‘low added value trap’ which is a high risk, because FDI will not flow to Vietnam if new rivals appear which offer lower labor costs.

Experts believe that Vietnam needs to be more selective in calling for FDI. It needs to attract projects which use high technology and create high added value, such as IT, electronics, IoT and AI, rather than industrial projects which pollute the environment.