VNU UNIVERSITY OF ECONOMICS AND BUSINESS

INERNATIONAL BUSINESS
*****

SUBJECT TITLE : INTERNATIONAL INVESTMENT

Subject code : 4002-E-01
FINAL ASSIGNMENT 2019-2020

Based on theoretical and practical framework, please analyze and forecast the
quality of FDI flow to Vietnam after Covid-19 pandemic (India, Malaysia,
Thailand, The philippines)

Lecturers: PGS- TS Nguyễn Thị Kim Anh

Implementer: Lê Thu Hường
ID : 17050605
Class: QH 2017 E – KTQT CLC

Hanoi, June 2020

Introduction

The outbreak of COVID-19 has brought upon unprecedented challenges, and is expected
to have a significant impact on Vietnam's economic development this year. Based on the
current situation, we have analysed the pandemic’s potential impact on the Vietnamese
economy. Such an exercise is accompanied by a considerable level of uncertainty.
Specifically, in the case of COVID-19, projections have been reviewed and re-adjusted
every week since the start of the outbreak. Many governments have taken stringent public
health measures to limit the spread of the COVID-19 pandemic. These public health
measures have caused severe economic disruptions that impact the foreign direct
investment (FDI) decisions of firms. Governments have also taken significant economic
policy actions to forestall, or cushion, the economic consequences of the public health
crisis. The eventual impact on FDI flows will depend on the success of both these public
health and economic policy responses. FDI could play an important role in supporting
economies during the economic recovery following the pandemic. Evidence from past
crises has shown that foreign-owned affiliates, including small and medium enterprises,
can show greater resilience during crises thanks to their linkages with, and access to the
financial resources of, their parent companies. FDI could be particularly important for
emerging and developing economies given that other sources of international financing,
including portfolio investment. Unfortunately, it appears that the impacts of the pandemic
on FDI flows to these economies may be particularly severe. For example, the primary
and manufacturing sectors, which account for a larger share of FDI in many of these
economies than in most developed economies like Thailand, Malaysia, India, Indonesia
have been particularly hard hit by the pandemic. Additionally, Vietnam’s economy is
highly dependent upon other economies. As such, the scenarios and projections relating
to the effects on the Vietnamese economy are also strongly correlated with the effects on
other countries resulting from the COVID-19 outbreak.
Chapter 1:
Theoretical of FDI
Country – based theories
H-O Theory
Assumptions of H-O Theory
- 2x2x2 model
- Same technologylX is L-intensive and Y is K-intensive
- Constant returns to scale
- Incomplete specialization
- Equal tastesl
- Perfect competition
- Internalfactormobility
- No transportation costs
- All resources are fully employed
- Exports equal imports.
A nation will export the commodity whose production requires the intensive use of the
nation's relatively abundant and cheap factor and import the commodity whose
production requires the intensive use of the nation's relatively scarce and expensive
factor.
The relatively labor-rich nation exports the relatively labor-intensive commodity and
imports the relatively capital intensive commodity.
Firm – based theories
Product Life Cycle Theory
Developed by Raymond Vernon
Argument: Production of a good is cyclical
–When a manufactured good is developed, producers experiment and seek consumers’
reactions
–When production leaves the early stage, the good begins to be standardized in terms of
size, features, and manufacturing process
–Finally, consumption of the good in a high-income country exceeds its production:
production moves where labor costs are lower
There are four stages in a product's life cycle:
 Stage 1: IntroductionNew products are introduced to meet local (i.e., national) needs,
and new products are first exported to similar countries, countries with similar needs,
preferences, and incomes. If we also presume similar evolutionary patterns for all
countries, then products are introduced in the most advanced nations. (E.g., the IBM PCs
were produced in the US and spread quickly throughout the industrialized countries.)
Stage 2: GrowthA copy product is produced elsewhere and introduced in the home
country (and elsewhere) to capture growth in the home market. This moves production to
other countries, usually on the basis of cost of production. (E.g., the clones of the early
IBM PCs were not produced in the US.)
Stage 3: MaturityThe industry contracts and concentrates --the lowest cost producer wins
here. (E.g., the many clones of the PC are made almost entirely in lowest cost locations.)
Stage 4: DeclinePoor countries constitute the only markets for the product. Therefore
almost all declining products are produced in developing countries (E.g., PCs are a very
poor example here, mainly because there is weak demand for computers in developing
countries. A better example is textiles.)
Note that a particular firm or industry (in a country) stays in a market by adapting what
they make and sell, i.e., by riding the waves. For example, approximately 80% of the
revenues of H-P are from products they did not sell five years ago.

Flying Geese pattern

Flying Geese pattern
A series of industries take off one after another
+ Created by Japanese economist
Kaname Akamatsuintending to explain the catching-up process of industrialization of
latecomer economies
+ It works through 3 different channels---Intra-industry aspect, Inter-industry aspect and
International aspect
Theory of internalization
+ Internalization theory answers why business transactions take place within a firm
(hierarchy) rather than between independent firms in a market
Firm specific advantages
+ To possess firm specific advantages is a necessary but not sufficient condition for FDI
to take place
 Market imperfections
+ Due to market imperfections, there may be several reasons why a firm wants to make
use of its monopolistic advantage itself (or organise an activity itself)
+ Buckley and Casson (influenced by Coase), suggested that a firm overcomes market
imperfections by creating its own market -internalisation
Internalisation
+ The theory of internalisation was long regarded as a theory of why FDI occurs
+ By internalising across national boundaries, a firm becomes multinational
+ Some economists have suggested that even though ownership specific advantages and
internalisation advantages are necessary for FDI to occur, it is still not a sufficient
explanation
Electric paradigm- OLI paradigm
John Dunning
+ John Dunning attempts to integrate a variety of strands of thinking
+ He draws partly on macroeconomic theory and trade, as well as microeconomic
theory and firm behavior (industrial economics)
O = Ownership advantages
+ Some firms have a firm specific capital known as knowledge capital: Human
capital (managers), patents, technologies, brand, reputation...
+ This capital can be replicated in different countries without losing its value, and easily
transferred within the firm without high transaction costs
I= Internalization
+ Given that ownership specific advantages are present, it must be in the best interest for
the firm to use these itself, rather than sell them or license them to other firms
+ These are Internalization or I-advantages, and can arise because a hierarchy is a more
efficient way of organizing transactions than a market

Problem:
–If the agent interrupts the contract it can use the technology to compete with the mother
company
–In the case of brands/reputation: if the agent damages the brand reputation
Of course there are suitable contracts, but those are potentially
Incomplete or difficult to enforce
L = Location Advantage
•In addition to ownership specific advantages as well as internalisation advantages are
necessary, it must be in the firms interest to use these in combination with a least some
factor inputs located abroad -so called location specific advantages or L-advantages
Producing close to final consumers or downstream customers
•Saving transport costs
•Obtaining cheap inputs
•Overcoming trade barriers
•Providing services (for most services, production and delivery have to be
contemporaneous)
By combining Ownership specific advantages, Internalisation specific advantages and
Location specific advantages, we get the “eclectic” approach to FDI -the so called O-L-I
paradigm of international production
The eclectic, or OLI paradigm, suggests that the greater the O and I advantages possessed
by firms and the more the L advantages of creating, acquiring (or augmenting) and
exploiting these advantages from a location outside its home country, the more FDI will
be undertaken
Where firms possess substantial O and I advantages but the L advantages favor the home
country, then domestic investment will be preferred to FDI and foreign markets will be
supplies by exports
4 types of FDI in the OLI
•The typology of FDI was developed by Jere Behrman to explain the different objectives
of FDI:
–Resource seeking FDI
+ To seek and secure natural resources e.g. minerals, raw materials, or lower labor
costs for the investing company
+ For example, a German company opening a plant in Poland to produce and re-
export to Germany
–Market seeking FDI
+To identify and exploit new markets for the firms` finished products
+ Unique possibility for some type of services for which production and distribution
have to be contemporaneous (telecom, water supply, energy supply)
+ Norwegian Telecom have invested heavily in Russia
–Efficiency seeking (global sourcing FDI)–Strategic asset/capabilities seeking FDI
To restructure its existing investments so as to achieve an efficient allocation of
international economic activity of the firms
+ International specialization whereby firms seek to benefit from differences in
product and factor prices and to diversify risk
+ Global sourcing –resource saving and improved efficiency by rationalizing the
structure of their global activities. Undertaken primarily by network based MNCs with
global sourcing operations.
 Chapter 2: Analyze and forecast the quality of FDI flow to Vietnam after Covid-19
pandemic (India, Malaysia, Thailand, Indonesia)

The pandemic is causing massive disruptions to flows of foreign direct investments. As

expected, developing countries like Vietnam were severely affected by the COVID-19
pandemic. This essay will show you how Vietnam has encountered and overcome the
difficulties of foreign investment in this pandemic.
Acording to the Asian Development Bank, Vietnam’s economy has grown strongly in
2019, as a result of a strong manufacturing, processing industry, high domestic demand,
and especially high Foreign Direct Investment. Unfortunately, the COVID-19 pandemic
occurred in early 2020, and it made it difficult for foreign capital to flow into Vietnam.
The border closure is necessary for the safety of the citizens, but it has a huge impact on
the national economy. The second outbreak of COVID-19 in March had really become a
difficult challenge for the government and the entire Vietnamese people, and severely
affected all of Vietnam’s major trading and investment partners. As expected, Vietnam’s
GDP fell to 3.8 percent in the first quarter of 2020 compared to 6.8 percent in the same
period in 2019 as per the General Statistics Office of Vietnam. According to experts, in
the context of difficulties covered by the disease, this result is still encouraging and is a
bright spot in Economic picture of Vietnam in early 2020. Vietnam’s declining foreign
investment inflow will be reversed soon with the government’s drastic anti-pandemic
measures providing effective, experts believe.
Although FDI attraction in the first four months of 2020 dropped 15.5 percent year-on-
year to $12.3 billion with drops in the number of newly-registered projects and value of
stake acquisitions, according to the Ministry of Planning and Investment, experts still
believe that the drops are only temporary, and when investors see that Vietnam has been
able to contain the virus, investment will surge. In fact, Vietnam has been successful in
containing the spread of COVID-19 by taking early action and implementing drastic
measures. Thanks to this achievement, Vietnam has received international praise and
many investors have paid attention to our country.
As of May 20, 2020, the total foreign direct investment (FDI) in Vietnam includes newly
registered capital, adjusted registered capital and value of capital contribution and share
purchase of foreign investors. 13.9 billion USD, down 17% over the same period last
year. However, at present, Vietnam is considered a good land for high-quality FDI
inflows from the trend of relocating production from China and after the Covid-19
pandemic. According IMF expert, many large international corporations and businesses
are seeking investment opportunities to diversify their supply chains and limit their
dependence on the Chinese market. Vietnam has become one of the brightest candidates
to welcome this capital inflow thanks to its success in disease prevention.

Taiwan's Pegatron, which makes Apple iPhones, has declared designs to set up a
production line in Vietnam before the year's over. The organization, which is the world's
second biggest agreement producer of hardware behind individual Taiwanese
organization Foxconn, is set to set up an industrial facility in a northern area to make
gadgets for web availability. It is planned to start activity one year from now. Taiwan's
Inventec, Apple's primary get together accomplice for AirPods, is supposedly getting
ready to set up a unit in Vietnam. Google is set to start creation of its minimal effort cell
phones with Vietnamese accomplices this year, while Microsoft is booked to deliver note
pads and PCs in the northern district in the subsequent quarter. Japan's Nintendo has
additionally made arrangements to move a portion of the creation of its Switch gaming
reassures from China to Vietnam. Besides, remote financial specialists have been looking
for land to set up their manufacturing plants. Regardless of Covid-19 effects, mechanical
land costs in the main quarter rose 6.5 percent in the north and 12 percent in the south, as
indicated by a report by land administration firm Jones Lang LaSalle (JLL). The report
said organizations hoping to expand their assembling portfolio outside China are pulled
in to Vietnam, on account of its nearness to the previous.
However, professor Nguyen Mai also warned that this opportunity is not only for
Vietnam, but also many countries want, especially the two "big countries" who are
looking to compete to attract FDI with Vietnam, India and Indonesia. In fact, India
announced that it would accept 1,000 large factories, ready for land and prepare
everything for this. Compared to Vietnam, India has a much higher level of information
technology, competing with both the US and China. The number of engineers and
workers trained annually is among the highest in the world. At the same time, labor costs
in India are now cheaper than in Vietnam. Meanwhile, Indonesia is the strongest
country in ASEAN, with a population of nearly 300 million people, 3 times that of
Vietnam. The Indonesian government is very interested in attracting foreign investment,
even directly approving projects of only 70-80 million USD, with 300 workers. Indonesia
also announced a readiness of a 4,000-hectare tech park to welcome high-tech projects
moving out of China.
However, Vietnam also has certain advantages to be ready for the movement of foreign
capital flows. The Vietnamese economy has a stable macro economy, low inflation, high
growth, stable currency and abundant human resources... After Covid-19, Vietnam is
emerging as a successful country in preventing, stamping out and becoming a safe
investment destination for foreign investors. Recently, Prime Minister Nguyen Xuan
Phuc decided to set up a special working group on FDI attraction, to welcome the wave
of shifting production to Vietnam after the pandemic. This shows that the Government
understands the importance and contribution of FDI to increasing productivity and
economic growth.

By investment area:
Foreign investors have invested in 18 fields, of which the processing and manufacturing
industry leads with total investment capital of US $ 6.88 billion, accounting for 49.5% of
the total registered investment capital. sign. Electricity production and distribution ranked
second with total investment capital of 3.92 billion USD, accounting for 28.3% of total
registered investment capital. This is followed by the retail and real estate business, with
total registered capital of US $ 945 million and US $ 801 million. The rest are other
fields.

By investment partners:
There are 96 countries and territories investing in Vietnam. Singapore leads the way with
a total investment of 5.31 billion USD, accounting for 38.2% of total investment capital
into Vietnam; Thailand ranked second with total investment capital of 1.45 billion USD,
accounting for 10.5% of total investment capital. China ranked third with a total
registered investment capital of 1.27 billion USD, accounting for 9.1% of total
investment capital. Next is Japan, Korea, Taiwan, ...

Considering the number of projects, South Korea ranked first (325 projects); China
ranked second (176 projects); Japan ranked third (133 projects); Hong Kong ranked
fourth (113 projects); ...
By investment area:
Foreign investors have invested in 57 provinces and cities across the country. Bac Lieu
continues to lead with a large project with an investment of 4 billion USD, accounting for
28.8% of total registered investment capital. Ba Ria - Vung Tau ranked second with a
total registered capital of 1.9 billion USD, accounting for 13.9% of total investment
capital [3]. Ho Chi Minh City ranked third with 1.6 billion USD, accounting for 11.5% of
total investment capital (of which investment in the form of capital contribution, share
purchase accounted for a large proportion, accounting for 76.9% of total investment
capital. registered capital of the City, accounting for 54.5% of the total capital
contribution, share purchase and 41.2% of the total value of contributed capital of the
whole country). Next are Hanoi, Ha Nam, Binh Duong ... Considering the number of
projects, Ho Chi Minh City leads the way (450 projects); Hanoi ranked second (258
projects); Bac Ninh ranked third (78 projects), ....
With new developments in international relations from the effects of the Covid-19
epidemic, FDI inflows are likely to continue pouring into Vietnam after the epidemic
ends. It is forecasted that the amount of FDI attracted in 2020 will decrease compared to
2019, but if there is a suitable solution, the amount of disbursed capital will reach a good
level and will not decline much. This is the time to actively promote disbursement of
capital and high quality capital to reflect the true effectiveness of FDI attraction activities.
In the long term, it is necessary to continue improving the business investment
environment, revising policies and strategies to attract foreign investment to suit the new
situation. In addition to completing the legal system, reforming administrative
procedures, it is necessary to create an attractive and proactive investment environment in
selecting projectsandinvestors.
The nature of foreign investment is long-term, so it is promising to attract foreign
investment after the epidemic ends and the process of restructuring and investment area
of foreign investors. It is worth mentioning that Vietnam has the advantage that the
investment environment is always improved, political stability, favorable geographical
position, and deeper and deeper international economic integration are evaluated by the
international community. High prices should take advantage of this advantage to catch
the opportunity to transfer investment to Vietnam. This advantage will also be multiplied
if Vietnam's efforts to prevent and control the COVID-19 epidemic have been
successfully evaluated by the international community. To be ready for this international
investment movement, we need to continue to improve the investment environment,
actively connect and work with major corporations of the world to exchange and share.
investment opportunities in Vietnam, they need to better understand Vietnam to support
their new decisions; implementing policies to support businesses affected by the Covid-
19 epidemic, demonstrating the Government's co-operation with businesses, thereby
strengthening the trust of the business and production community. At the same time,
always preparing well the conditions on institutions, policies, laws, land, human
resources, energy... to be ready to receive large projects, projects in line with the
orientation to perfect the body. mechanisms, policies, improve the quality and efficiency
of foreign investment cooperation.
According to Ministry of Planning and Investment, As of May 20, 2020, the total newly
registered, adjusted and contributed capital of foreign investors was 13.8 billion USD,
equaling 83% compared to the same period in 2019. Specifically, the whole country had
1,212 projects were granted investment registration certificates with total newly
registered capital of over USD 7.4 billion. Regarding adjusted capital, there are 436 times
of projects adjusting capital with the additional capital of more than USD 3.4 billion.
Besides, there were 3,528 times of capital contribution and share purchase of foreign
investors in Vietnamese enterprises with a total capital of 2.99 billion USD. In the five
months of this year, foreign direct investment projects are estimated to disburse 6.7
billion USD. Regarding the import-export and export situation of the foreign invested
sector (including crude oil) reached 66 billion USD; import reached 55.5 billion USD.
Particularly in May 2020, the whole country attracted US $ 1.55 billion of newly
registered capital, adjusted and contributed capital, bought shares of foreign investors,
equaling 72.4% of the attracted investment capital. In the same period of 2019,
accounting for 11.2% of the total investment capital in the first 5 months, equaling 41.1%
compared to April, equaling 74.6% in March and up 36.3% compared to February / 2020:
- There were 228 projects granted new investment certificate, total registered capital
reached 660.2 million USD, equaling nearly 59.3% compared to the same period in 2019
and accounting for 42.5% of total investment capital in the month. Although the number
of newly registered investment projects in May increased slightly compared to April,
after completing the small scale projects, not many large projects, the total registered
investment capital in May was only equal to 52. , 9% of April 2020.
- There are 101 times of projects adjusted capital, the total registered capital increased by
nearly 381.1 million USD, equaling 73.5% compared to the same period in 2019,
accounting for 24.5% of the total investment capital in the month. Similar to newly
registered capital, adjusted investment capital in May dropped sharply (by 81%)
compared to April 2020, although the number of adjustments increased because there
were many large capital adjustment projects in April.
- There are 318 turns of GCPCP of foreign investors, the total value of contributed capital
is nearly 512 million USD, equaling 99.5% over the same period in 2019, a slight
decrease (2%) compared to April 2020 and accounting for nearly 33% of total capital
investment in the month.
Accumulated to May 20, 2020, the whole country has 32,025 valid projects with a total
registered capital of nearly 376.6 billion USD. The accumulated realized capital of
foreign direct investment projects was estimated at 218.48 billion USD, equaling 58% of
the total valid registered capital.
- By field: Foreign investors have invested in 19/21 branches in the national economic
sub-system, of which the processing and manufacturing industry accounts for the highest
proportion with 220.3 billion USD, accounting for 58.5% of total investment capital,
followed by real estate business with 58.3 billion USD (accounting for 15.5% of total
investment capital); electricity production and distribution with 27.5 billion USD
(capturing 7.3% of total investment capital).
- By investment partners: There are 136 countries and territories having investment
projects in Vietnam. In which, South Korea ranks first with total registered capital of 68.2
billion USD (accounting for 18.1% of total investment capital). Japan ranked second with
59.9 billion USD (accounting for nearly 15.9% of total investment capital), followed by
Singapore and Taiwan, Hong Kong.
- By location: Foreign investment has been present in all 63 provinces and cities
nationwide, of which Ho Chi Minh City is still the leading province in attracting foreign
investment with US $ 47.6 billion (accounting for 12.6%). total investment); followed by
Hanoi with 37.6 billion USD (accounting for nearly 10% of total investment capital);
Binh Duong with 34.8 billion USD (capturing 9.2% of total investment capital).
Opportunities and advantages for Vietnam to promote FDI attraction after the post-Covid
19 period are huge. Therefore, in order to realize these opportunities, it is necessary to
pay attention to the following issues:
Firstly, Vietnam needs to prepare ground for investors. Currently, there are more than
350 industrial parks (IPs) in the country, about 17 economic zones (EZs), of which 50%
of industrial zones and EZs are not yet filled. Therefore, the Government and local
leaders must instruct the industrial zone and economic zone management boards to
prepare the ground so that when investors want to leave the factory or invest in new land,
the land can be easily and quickly provided.
Secondly, Vietnam needs to prepare abundant human resources, especially high quality
human resources to meet the needs of investors.

Thirdly, we need to prepare basic information about infrastructure, water supply, water,
time to transport goods from factories to ports, airports ... to provide timely for the
partners. When they want to find out, avoid the investors have to "find out" the
information will cause long-term investment promotion process, maybe even
discouraging investors. Finally, administrative procedures need to be carried out
conveniently and quickly. In particular, we should not consider the factories of foreign
investors producing in China as old machines and equipment, and then force them to
report and verify equipment in accordance with the guidance of the Ministry of Science
and Technology, there will be no investors coming to Vietnam. On the contrary, we need
to enable them to move the factory, and then, during their operation, production, the
authorities will check if they meet the legal requirements. , Vietnam's requirements on
issues such as environmental pollution, wastewater treatment, labor safety assurance, etc.
The expert emphasized that GDP growth and FDI attraction also depend on the ability to
control the epidemic of traditional partners of Vietnam, because if those countries are still
greatly affected by disease, that will affect the exports of Vietnam. Vietnam has granted
investment licenses to 758 new FDI projects with a combined registered capital of 5.5
billion USD in the first quarter of 2020, an increase of nearly 45 percent year-on-year,
according to the Foreign Investment Agency under the Ministry of Planning and
Investment. More than 230 existing projects registered to add 1.07 billion USD to their
existing capital in the quarter, equivalent to 82 percent of the figure in the same period
last year. The value of capital contributions and share purchases by foreign investors
reached almost 2 billion USD, equivalent to 34.4 percent of the figure in the same period
of 2019. Singapore topped the list of 87 countries and territories investing in Vietnam
during the first three months, with 4.54 billion USD, or 53.1 percent of the total. It was
followed by Japan (846.7 million USD) and China (815.6 million USD).
Some major projects in the first 5 months of 2020:

(1) Bac Lieu liquefied natural gas (LNG) power plant project under LNG Bac Lieu
thermal power center (Singapore), total registered capital of US $ 4 billion with the goal
of producing electricity from natural gas. LNG (issued with certificate of competency on
January 16, 2020).
(2) Southern Vietnam Petrochemical Complex Project (Thailand) in Ba Ria - Vung Tau,
adjusted to increase investment capital by VND 1,386 billion on April 18, 2020.
(3) Radian Jinyu Tire Manufacturing Plant (Vietnam), with a total investment of US $
300 million with the goal of producing all-steel TBR tires invested by Chinese investors
in Tay Ninh (issuing certificates of investment certificate on 1/21/2020).
(4) Victory Project - A factory manufacturing high-tech electronic products in Dong Van,
Ha Nam (Taiwan), with a total investment of USD 273 million with the goal of
manufacturing and assembling electric computer equipment. electronics and peripherals;
Production of civil electronic audio and visual equipment (granted this certificate of
competency 1/4/2020)
(5) Office building project at 29 Lieu Giai (Singapore), adjusted to increase investment
capital by 246 million USD on March 31, 2020.

However, several experts say that regardless of how many FDI projects are registered,
their quality is more important. Vietnam has been attracting FDI for over three decades,
but the government in recent years have been calling local authorities to be more
selective in FDI attraction by selecting the high-tech and clean sectors to reduce
environmental pollution. But there were few projects of this type this year. The decrease
in total value is inevitable because of the pandemic, but in the long run Vietnam needs to
seek more projects that prioritize advanced technologies and environment friendliness.

What about outside Vietnam? We will contact a little with some Asian countries such as
India, Malaysia, Thailand, Philippines. Take a look at these countries' economic changes
and future predictions of foreign investment.
1. India
Although India is still suffering the heavy losses brought by the COVID-19 pandemic,
typically on May 28 alone, the country announced an additional 6,566 cases of COVID-
19, they still had very impressive numbers of foreign direct investment.
If the equity of unincorporated enterprises, reinvestments and other capital sources is
included, the total FDI gained in the past year reached 73.4 billion USD, up 18%
compared to 63 billion USD of fiscal year 2018-2019. According to India's Department
of Domestic Trade and Industry Promotion (DPIIT), industries that attract large foreign
capital flows in the 2019-2020 fiscal year include services ($ 7.85 billion), software and
machine hardware. counting (7.67 billion USD), telecommunications (4.44 billion USD),
transactions (4.57 billion USD), cars (2.82 billion USD), construction (2 billion USD)
and chemicals ( 1 billion USD).
Geographically, Maharashtra continues to be the most popular destination for investors,
attracting US $ 7.2 billion of FDI last year, followed by Karnataka state with US $ 4.2
billion, the prime region. Delhi attracted US $ 3.9 billion, Gujarat state - home to
incumbent Prime Minister Narendra Modi attracted US $ 2.5 billion, notably Jharkhand
state, a very small state with an area of 79,710 km2 and population. About 33 million
people have attracted $ 1.8 billion in 2019-20.
Singapore emerged as the largest source of FDI in India in the past fiscal year with a total
investment of 14.67 billion USD, followed by Mauritius (8.24 billion USD), Netherlands
(6.5 billion USD), USA. (4.22 billion USD), Caymen Islands (3.7 billion USD), Japan
(3.22 billion USD) and France (1.89 billion USD). Currently, FDI plays a very important
role for India, because this South Asian country is in need of large investments to
upgrade infrastructure for economic growth.
Previously, on April 17, 2020, DPIIT amended regulations on policies to attract FDI from
neighboring countries including China, Nepal, Myanmar, Bhutan, Afghanistan, Pakistan
and Bangladesh to India, which must be approved by the Government of India. Pre-
approval. Accordingly, a business of neighboring countries, or the owner, is the
beneficiary of the benefits of FDI in India, which in neighboring countries, or citizens of
neighboring countries when investing in FDI. access to India requires prior government
approval. This is considered a regulation to prevent capital inflows from China.

2. Malaysia
Malaysia also recently reviewed and oriented to welcome investment waves. The
Ministry of Industry and International Trade Malaysia (MITI) is known to identify
potential Japanese companies to shift production activities from China to invest in
Malaysia after COVID-19. Senior Minister cum MITI Minister Datuk Seri Mohamed
Azmin Ali said this followed Japan’s decision to help its manufacturers shift production
out of China or relocate their operations to other countries in response to the COVID-19
impact. He also affirmed that Malaysia could provide the best infrastructure, a stable
politics and a skilled workforce.
According to Azmin , Malaysia will focus on high-tech industries, as this is a group that
creates better job opportunities for local workers. Malaysia now has preferential
programs for high-tech investment to attract FDI, for example, the Digital Free Trade
Area (DFTZ), which allows investors to exploit trade and logistics capabilities. cross the
border.
Other incentives, such as tax reductions, also apply to key industry groups, to take
advantage of artificial intelligence and the Internet of things to promote electronic
growth.
It is important that Malaysia-based European companies could benefit from the stimulus
package that the government has offered for Covid-19 the same way as other companies
in Malaysia would, said Ambassador and Head of the Delegation of the EU to Malaysia,
Maria Castillo Fernandez.
She said as around 2,000 EU companies employ over 250,000 personnel in Malaysia, it is
most important that the government provides support for wage costs to avoid layoffs as
EU companies have been affected in the same ways as Malaysian businesses have.
Fernandez explained that as Malaysia’s Wage Subsidy Programme’s salary threshold has
been set at RM 4,000, many European companies are not eligible to benefit from the
scheme.
This policy of Malaysia contributes to encourage investment from foreign businesses.
The Malaysian government tries to create favorable conditions for businesses to sprint in
the race to attract foreign investment after the COVID-19 pandemic.

3. Thailand
Foreign direct investment is an important element of Thailand's economic development,
and the country is one of the major FDI destinations in its region. According to the
UNCTAD World Investment Report 2019, in 2018, FDI flows continued their recovery
and rose to USD 10.49 billion, and cccording to public agency Thailand Board of
Investment, FDI flows in the first nine months of 2019 increased 69% from the year
earlier period to USD 6.7 billion. This recovery is due to increased investment from
Japan, Hong Kong and Mauritius. The stock of FDI edged down slightly to USD 222.7
billion in 2018, or 48.9% of the country's GDP. Japan and Singapore are by far the largest
investors in the country and account for slightly more than half of FDI inflows. Hong
Kong, the Netherlands, Germany, Mauritius and the United Kingdom are also among the
major investors. Manufacturing and financial and insurance activities attract nearly 70%
of all FDI inflows. Investments in real estate, commerce and information and
communication are important.
Thailand is among the countries with the most reforms in business regulation over the
past few years, which have facilitated the setting-up processes and reduced the time to
start a business from 29 days to 6 days. The country has improved considerably its
ranking in the World Bank's Doing Business, and it occupies 21st position in the Doing
Business 2020 ranking, gaining six positions from the previous year. The rights of
borrowers and creditors have been strengthened as well as the system of land
administration. The country has taken steps to clarify corporate governance, ownership
and control structures by enacting legislation requiring companies to appoint independent
members of the board of directors and to establish an audit committee. Thailand
continues to offer more incentives to invest in advanced technologies, innovative
activities and research and development through the Investment Promotion Act, and the
Eastern Enonomic Corridor (EEC) Act, which offers benefits to investors in this zone
(tax subsidies, right to land ownership, issuing of visas), should provide further support to
FDI flows in the upcoming years. The junta's continuing grip on power has reassured
many foreign investors previously deterred by potential instability. Growing regional
competition risks, however, risk to diminish Thailand's attractiveness as an investment
destination.
However, Thailand has achieved many significant economic achievements, mainly based
on an open economy with few tariffs and limited import volumes. In addition, this
country also has a free enterprise system, less government intervention. That helped
Thailand become a production center dubbed "Detroit of Asia". But the problem for
Thais now is a bigger ambition: to escape the middle-income trap.
Therefore, in an exchange on the Bangkok Post in mid-May, CEO of Renewable Energy
Company Energy Absolute - Mr. Somphote Ahunai, affirmed that Thailand is no longer
heavily dependent on FDI (foreign direct investment).
Therefore, according to Mr. Ahunai, Thailand can handle by focusing on the original
technology production model (OTM), to increase the added value and wages of the
workers, instead of earning very little by labor. In the original equipment manufacturing
model (OEM), which was previously Thai strength in some areas of manufacturing
machinery and electronic components.
Thailand is also one of Vietnam’s biggest investors.
As of April 20, the total registered capital and capital contribution of foreign investors to
Vietnam reached US $ 12.33 billion, of which, Singapore and Thailand were the two
largest groups of investors. The data recorded in the report of the Ministry of Planning
and Investment shows that the total newly registered capital, adjusted and contributed
capital to buy shares of foreign investors to Vietnam in the first 4 months of this year
reached 12.33. billion USD, equivalent to 84.5% compared to the same period in 2019.
In particular, newly registered capital and adjusted capital increased over the same period
but the share capital contribution of foreign investors decreased sharply, reducing the
total investment capital.
However, in terms of value, registered capital in the beginning of the year still increased
compared to the same period in 2016-2018.
Of the tens of billions of USD of registered capital poured into Vietnam since the
beginning of the year, 984 new projects were granted investment registration certificates
with a total capital of 6.78 billion USD, a decrease of 9% in the number of projects but an
increase of 27% in terms of registered capital over the same period. The increase in
investment capital was due to the new certificate of Liquefied Natural Gas Power Plant
(LNG) project in Bac Lieu with a total investment of up to US $ 4 billion, accounting for
59% of the total newly registered capital. As for the adjusted capital, there were 335
times of registered projects with an adjusted capital of US $ 3.07 billion, equivalent to an
increase of 46%. This FDI increased sharply after a continuous decrease in the first 3
months of the year due to the South Vietnam Petrochemical Complex Project in Ba Ria -
Vung Tau with an additional capital of US $ 1,386 billion.
In addition, the first 4 months of the year also recorded 3,210 times of capital
contribution and share purchase by foreign investors with a total value of nearly US $
2.48 billion.
Foreign investors have registered to invest in 18 industries and sectors, in which
processing and manufacturing industries attracted the most capital with nearly US $ 6
billion, equivalent to 48% of the total registered capital. Besides, the field of electricity
production and distribution also attracted US $ 3.9 billion; wholesale and retail wholesale
776 million USD; and real estate business attracted 665 million USD.
Of the tens of billions of dollars, the largest group is investors from Singapore with $
5.07 billion registered capital, accounting for 41% of total investment in Vietnam since
the beginning of the year. Ranked second is the Thai investor group with US $ 1.46
billion (accounting for 12%). In addition, Japanese investors also registered US $ 1.16
billion, ranked third, followed by China, Taiwan, and South Korea.
In previous years, the largest group of investors in Vietnam market were mainland China,
Japan or Korea.
If calculating the amount disbursed directly from the beginning of the year, foreign
investors have poured 5.15 billion USD into Vietnam, equivalent to more than 90% over
the same period.
In the first months of the year, despite being affected by the Covid-19 epidemic, foreign
investors still imported US $ 46.32 billion of goods, up nearly 3% over the same period
and accounting for 58% of import turnover.

4. Indonesia

Although it is assessed that there are similarities in the business environment, human
resources, logistics infrastructure with Vietnam, Indonesia is proactively taking the lead
in investment movement. In recent days, the information that Indonesia has enlisted to
"welcome" American companies in the area of relocating production from China is
attracting attention. Accordingly, Indonesian Minister of Maritime Affairs and
Investment, Mr. Luhut Pandjaitan, said that the Government of Indonesia is having
conversations about the ability to attract investment from US pharmaceutical companies.
want to move production out of China.
Most recently, the Nikkei Asian Review on June 9 said Indonesia was in dialogue with
the US Government about the possibility of relocating operations of some US companies
from China to Indonesia.
Indonesia's maritime and investment coordinator Luhut Panjaitan confirmed that the
Indonesian government has offered to reserve a number of positions in the country's
industrial parks for US companies to move.
The properties for this production include the Kendal Industrial Park in Central Java - an
exclusive economic zone with many tax incentives. Another Indonesian nominee is
Brebes Industrial Park, one of 89 national priority projects developed by President Joko
"Jokowi" Widodo.
Panjaitan said about 20 companies had "expressed interest" in moving to Indonesia. A
spokesperson added that Panjaitan held a dialogue with the executives of the US
International Development Finance Corporation (IDFC), a government agency, after "a
dialogue between Mr. Jokowi. and Mr. Trump. " This is the latest in a series of
information about Indonesia actively negotiating and preparing for welcoming American
companies. Panjaitan was also the one who appeared in the news about US President
Donald Trump "deciding to move 27 factories from China to Indonesia" after a phone
call with Mr. Jokowi in April. Up to now, information about the above 27 factories has
not been official, hardly appeared any more in the international press. However, it is also
an indication that Indonesia is quite determined to propagate the goodwill to invite its
investors.
Commenting on this move of Indonesia in attracting FDI, experts Bui Ngoc Son, Institute
of Economic and Political World, said that Indonesia has actively welcomed investment
flows.
Accordingly, from 2019, Indonesia has realized that it is not an ideal destination for
investors. The US State Department's statement in 2019 emphasized unstable legal
factors, economic nationalism, import and export restrictions are factors that make
investing in Indonesia unattractive.
Along with that, the representative of the World Bank (WB) also informed about 33
major investors moving away from China, the destination is said to be Vietnam, India,
Thailand and some to Malaysia but not Indonesia.
Many people at that time thought Indonesia was not a destination for foreign investors
when they withdrew from China. However, it is not so.
The analyst, recently, Indonesia has shown a lot of reform efforts to change the decision
of investors. First of all, they reduce taxes. In Indonesia, the general corporate income tax
rate is 25%, they aim to reduce the tax rate to 23% by 2021, which is equivalent to the
ASEAN average. Enterprises with revenues of less than 4.8 billion rupees are entitled to a
tax rate of 1% on annual revenue. Enterprises with turnover of between 4.8 and 50 billion
rupees are entitled to the tax rate of 12.5% for the taxable income corresponding to the
turnover of 4.8 billion rupees.
In addition, Indonesia's Labor Law is also considered to be "shabby" making investors
reluctant to enter for business production. But now Indoneisa has changed, labor
regulations are implemented uniformly across localities to make investors more secure.
In particular, Indonesia has also opened the investment environment for services, finance
and high technology.
The Indonesian Prime Minister was also said to be able to maintain the country's political
stability. It is these that make foreign investors start to notice Indonesia.
According to the World Institute of Economics and Politics, in the long term, Indonesia
has 3 times the population of Vietnam, so in the long term, this is an ideal market for
investors.
Indonesia's logistics, though not developed, has an advantage near Singapore. Therefore,
investors can take advantage of Singapore's logistics system, seaport system and
infrastructure right next door.
Indonesia, apart from its large population, has strong resources. Therefore, the last 5
months Indonesia, along with changes in business environment factors, has attracted
investors, especially US investors.
Through these above information, with the Southeast Asian countries racing in a sprint to
attract foreign investment, what does Vietnam need to do to cope with these challenges?
According to Bui Ngoc Son, Vietnam, with the success of COVID-19 epidemic
prevention and stable macroeconomy, is considered an attractive destination for
investors. However, in order to really reassure investors, making them pour capital,
Vietnam must reform strongly. Looking at the similarities and differences mentioned
above between Vietnam and India, Thailand, Malaysia, and Indonesia, we will see that
we have a stable macroeconomic advantage, abundant labor and good virtues with a
pleasant salary for investors. The advantage of being close to China is also seen as a plus
point in the movement of investors.
Vietnam needs strong reforms firstly on the quality of human resource training.
Along with that, labor wages in Vietnam are relatively comfortable for investors but the
salary policy is constantly changing, the regional minimum wage increases steadily each
year. This is the point we need to change.
In particular, the business environment is a matter of particular concern to investors.
Accordingly, the business investment environment in Vietnam is still considered by many
foreign investors to be demanding and costly. Therefore, it is necessary to change
institutions, change the way to favor development of the state and private sector.
Vietnam must have a clear investment attraction strategy, the strategies must be widely
informed to investors in what direction the business environment will change, and
education reforms.
Taking Indonesia for example, with 13 quickly-built refractive zones and 7 special
economic zones planned to be built in 2020, experts say that they have created land and
incentives for each type. Investment, this is the advantage. Therefore, Vietnam needs to
build special economic zones, experts said that it is still necessary to build special
economic zones, creating territories that can rule laws beyond national institutions,
unifying and creating conditions. for development investors, avoiding the situation of
each locality a current regulation.
However, special attention should be paid to the economic zones to determine whom? If
only to serve Chinese investors as before, it is not attractive. It must be shown to
investors who are special economic zones of Vietnam. Avoiding the situation as recently
appeared, China "disguised" to own land and Vietnamese businesses. At the same time,
note that Vietnam should take advantage of attracting high technology investors, clean
energy...

Finally, in conclusion, Vietnam needs to have clear strategies, as well as maintain the
prevention of disease spread, so that we can attract good quality investment directly.
foreign. The prevention of the COVID-19 pandemic in recent months has proved that
Vietnam has all the necessary factors to accelerate in the sprint race to attract foreign
investment with other countries in the region, especially Indonesia and India.