Vietnam needs removing roadblocks in order to lure greater foreign direct investment (FDI) moving forward, according to Tim Evans, Chief Executive Officer (CEO) of HSBC Vietnam.

The CEO emphasised that the Government’s strategy to attract additional FDI into the country should start with understanding the competitive landscape between Vietnam and the rest of ASEAN, whilst also looking at other market such as India and Mexico.

He revealed that Singapore and Malaysia are currently leading the semiconductor ecosystem, with Singapore being the wafer fabrication and front end equipment hub and Malaysia being the packaging and back end testing hub. Thailand has become the established auto supply chain and power supplier for EVs, whilst Indonesia is targeting the EV ecosystems with its abundance of nickel and a large domestic auto market.

Meanwhile, the Vietnamese side is slowly venturing into both EV and semiconductors as it aims to focus on more high value added goods but continues to perform well in terms of enticing large electronics manufacturers into the market off the back of competitive pricing, stable, and consistent Government support. This is along with other factors such as having the large number of free trade agreements (FTAs) in place in the region and the work ethic of the Vietnamese.

The HSBC representative underscored the importance of identifying the biggest ‘pain points’ as perceived by foreign investors and set a comprehensive and implementable action plan in place aimed at addressing these.

First is the overall quality and accessibility to labour and the ongoing need to improve productivity as Vietnam moves up the quality curve. The nation still ranks behind other major ASEAN markets in terms of labour productivity with output per hour worked being relatively low at 9.7 compared to a range of 10~26 for other ASEAN member nations. 

Second is that the Vietnamese logistics performance index also lags behind that of China, Malaysia, and Thailand, with gaps shown in logistics capacity, delivery time, and traceability.

Logistics infrastructure currently falls short of meeting the expected international standards and road transport command, whilst a 74% share of overall transport shows the demand is actually skewed towards sea transport and port space, thereby supporting the export story from Vietnam.

Finally, regulatory navigation continue to be a critical consideration for investors looking to invest into the nation.

According to the latest HSBC Global Connections survey, regulatory developments are among the top two challenges for foreign firms operating in the country, in which 30% of surveyed companies pointed to the challenge of adapting to fast-changing regulations and policies within the market.

A more consistent and easy to comprehend regulatory framework would be a positive step in attracting new parties to invest into the market, Evans noted.

VOV