SG Speech 2018-12-20
Vietnam Investment Promotion Conference for Food Processing Industry
15 November, Ho Chi Minh City, Vietnam
by H.E. Lee Hyuk, Secretary General of the ASEAN-Korea Centre
◆ Mr. Vu Ba Phu, Director General, Vietnam Trade Promotion Agency (VIETRADE), Ministry of Industry and Trade (MOIT)
◆ Mr. Nicholas Audier, Chairman of European Chamber of Commerce in Vietnam
Distinguished participants, ladies and gentlemen,
It is my honor to welcome you all to the 2018 Vietnam Investment and Trade Promotion Conference. I would like to first congratulate VIETRADE for successfully holding the 4th “Investment Promotion Conference in Food Processing Industry,” which is one of the most important events during the Vietnam International Food Industry Exhibition. The ASEAN-Korea Centre is truly pleased to be a part of this meaningful event.
As former Ambassador to Vietnam, I had the privilege to witness the remarkable progress which Vietnam has achieved in its economy. Over the past decades, Vietnam has been taking numerous steps to open up its economy to the world.
The Korea-Vietnam FTA entered into force in 2015. The EU and Vietnam agreed on final texts for Free Trade Agreement in this year. Vietnam has also agreed to join the CPTPP(Comprehensive and Progressive Agreement for Trans-Pacific Partnership), promoting further economic exchanges with New Zealand and 10 other countries in the Pacific region. As such, Vietnam has been pursuing an open and market-oriented economy in promoting global trade and attracting foreign investments.
I believe it was through these efforts that Vietnam’s economy was able to achieve the growth rate of 6.8% in 2017, reaching its peak in 10 years despite not so favorable global economic environment. With my personal attachment to Vietnam, I highly appreciate and am very proud to witness that these efforts have led to such a remarkable economic growth.
As we are here today at the Investment Promotion Conference in Vietnam, I would like to talk more about FDI’s role and its importance in Vietnam’s economy before today’s sessions.
The Role of FDI in Vietnam’s Economy
FDI plays a crucial role in leading Vietnam’s economy. Since the enactment of the Foreign Investment Law in 1987, the total amount of FDI attracted by Vietnam in the past 30 years has been notified to be $334 billion. FDI has played a major role in developing Vietnam’s IT, oil & gas, electronics, iron & steel, automobile, textile & garments, footwear, food processing, infrastructure, and etc.
As a result, the share of FDI in Vietnam’s GDP expanded from 6.3% in 1995 to 20% in 2017, constituting 25% of Vietnam’s total investment, 50% of total industrial production, and 75% of total exports. It also has led to creating approximately 3.7million jobs. Overall, FDI has played a pivotal role in integrating Vietnam into the global economy by enhancing its industrial competitiveness.
However, there is still room for improvement to set up a long-term strategy for Vietnam’s FDI goals. Currently, the US and EU are showing lack of interest in Vietnam’s FDI opportunities, displaying relatively low share of investment. Furthermore, Vietnam has not been able to receive sufficient benefits of the spill-over effects of FDI including technological transfer; and this has been a challenge for Vietnam to join the global value chain. This is mainly because of its lack of competitiveness in technology and quality of some products. Some foreign investors have been hesitant to include Vietnamese companies in their supply chain due to their lack of trust for product quality.
Some policy advices for FDI strategy
Bearing these challenges in mind, I am happy that Vietnam tries to develop a more competitive FDI strategy to attract more foreign investment in the long-run. Previously, Vietnamese FDI strategies focused more on providing low-cost labor and investment incentives on corporate tax and tariff reduction.
However, the world has faced a new era with the advent of the 4th Industrial Revolution, where countries are striving to develop their own competitiveness and differentiated FDI strategies. Countries including Myanmar, Cambodia, and Bangladesh have already acquired their competitiveness in providing cheaper labor force than Vietnam does. Also having in mind that Vietnam’s average wage is continuously rising, it is imperative that we proceed with a new set of strategies for Vietnam.
As you are well aware, some of the necessary measures that need to be taken include assuring transparency in legislation and fair enforcement of law, nurturing more skilled labor, and guaranteeing stronger intellectual property right protection. This way, Vietnam may attract more FDI even from the US and EU that accompany innovation and new technology.
Ultimately, Vietnam should strive to become a country known for high-quality products with skilled labor force by creating a more advanced, friendly, and reliable business environment. In order to do this, the government needs to encourage and fund its enterprises to invest in R&D , adopt more advanced technologies from abroad, invest in its human capital, and improve the quality of its products.
Analysis on Korean Investment in Vietnam
Next, I would like to talk a little bit more about Korean investment in Vietnam.
Ever since the normalization of relations between Korea and Vietnam in 1992, the two nations have been expanding areas for cooperation and exchanges in fields such as politics, economy, security, culture, education, science and technology. For Korean companies, Vietnam has long been an appealing opportunity for investment. In 2014, Korea surpassed Japan in becoming the largest foreign investor in Vietnam and has been maintaining its reputation ever since, with a total investment of $65 billion by the end of July 2018. Currently, approximately 4,200 Korean companies have presences in the Vietnamese market.
There are many reasons why Korean companies strongly prefer to invest in the Vietnamese market.
First, Vietnam possesses a labor force that is competitive in quality and cost. With its population size of near 100 million centered on young people and its stable economic growth, the size of Vietnam’s middle class is expanding and the consumer market is growing. Uncertainties and risks in business are also minimized due to the country’s political stability. Its open economic policies have led to as many as 16 free trade agreements and created a business-friendly environment. Such improvements of export conditions have transformed the Vietnamese market to become more credible and attractive, not to mention the effects of the Korean government’s New Southern Policy. As such, Korea’s interest in investing in Vietnam continues to be prominent.
The World Bank also positively assessed the efforts of the Vietnamese government. according to the latest World Bank annual ratings, Vietnam has ranked 68 among 190 economies in the Ease of Doing Business Report last year. This is 14 ranks higher than the previous year, marking the highest record and the biggest improvement so far. However, I think that Vietnam deserves to be ranked higher than this.
Ladies and Gentlemen,
Personally, I am confident that Vietnam will continuously grow to be an attractive destination for future FDI and that its economy will flourish beyond expectations, if you continue to make efforts to integrate your country into global economy.
Taking this opportunity, I would like to express my gratitude to the Vietnam Trade Promotion Agency, government officials from various authorities and businesspersons. My deepest appreciation also goes to the Korean private sector representatives in the food industry for traveling a long way to join us today. I believe that your presence is a reflection of Korea’s dedication to enhance business and economic ties with Vietnam.
Finally, I sincerely hope this conference becomes a platform for Vietnamese businesses and foreign investors to search business opportunities and strengthen cooperation. I wish you all a meaningful time with fruitful outcomes.
Thank you very much. Xin Cảm ơn.