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Old technologies and labor quality may reduce FDI attraction opportunities

By Van Phong

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HCMC – Vietnam may face disadvantages in global supply chains due to its outdated technologies and poor labor quality.

Nguyen Thi Vu Ha, an expert at the Vietnam Institute for Economic and Policy Research (VEPR), expressed her concerns over the risk of Vietnam being the destination for low-quality foreign direct investment (FDI) projects. She was speaking during a conference themed, “FDI of the EU inflows into Vietnam while EVFTA and EVIPA are in effect”, held on October 25.

In the Industry 4.0 era, most investors seek countries with a well-trained workforce and advanced technologies, something Vietnam does not have, rather than cheap labor or natural resources.

Data from the Ministry of Planning and Investment showed Korea was the biggest foreign investor in Vietnam as of August 2022, followed by Singapore and Japan. 

European investors mainly poured capital into the manufacturing and processing sectors to make use of low-cost labor.

“Outdated technologies, along with a low workforce quality, may put Vietnam in an inferior position in global supply chains,” Ha said.

The total newly registered, value, and paid-in projects by foreign investors rose despite some minor short-term fluctuations, an expert of VEPR said, adding that businesses from 25 countries in the EU27 invested in over 2,300 projects in Vietnam, with registered capital worth nearly US$27.6 billion.

The EU’s investments accounted for a mere 6.41% of the total FDI poured into the country. Statistics from the statistical office of the European Union and the General Statistics Office of Vietnam showed the bloc’s investment proportion into the country was very modest, ranging from around 2-5% of the total amount it invests worldwide.

To leverage the opportunities brought about by the EVFTA, the experts suggested boosting research on the impacts of EVFTA, which will enable the State and businesses to prepare better policies and strategies.

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