Hanoi (VNA) - Multinational corporations are turning to new modes of foreign direct investment (FDI), such as manufacturing and services lease, agricultural contracts and franchising in order to seek better business results.
A report announced by the United Nations Council on Trade and Development (UNCTAD) showed that global FDI inflows in 2018 reached 1,300 billion USD, with 512 billion USD coming to developing countries in Asia. The leading economies in attracting FDI are China, Hong Kong (China), ASEAN countries, India, and Turkey.
In addition, the industries and forms of FDI have also tended to change.
Global FDI shift sees great changes
According to a report from the International Finance Corporation (IFC), the global FDI shift (in the 2011-2016 period) saw great changes, with the services-based industries accounting for half of the FDI. However, in the ASEAN region, new investment projects have not yet followed this trend when non-service investment attraction is still high. FDI has mainly flowed into the textile industry, industrial machinery- equipment, automobiles, motorcycles, electronics, consumer goods, food processing and supporting industries (metal materials, plastics, chemicals and packaging).
Therefore, in order to attract new-generation FDI inflows, IFC experts said that it is important for Vietnam to attract more investors from Europe and the US in the coming period, besides those from Japan and the Repulic of Korea. This will help diversify FDI sources for high value-added activities, thereby improving and enhancing technology transfer to the domestic private sector.
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Data from FDImarkets showed that Vietnam has effectively attracted FDI inflows from Europe. Over the past 14 years, Vietnam has surpassed Thailand, the Philippines and Indonesia in luring European investment.
The country also ranked third in attracting FDI from the US, only after the Philippines and Malaysia.
According to IFC experts, neighbouring China is an important destination of global FDI with the largest volume in Asia. While European investors continue to promote large investments here, the US remains the main FDI provider for China, with 1.78 billion USD in 2017 or 10 percent of total foreign investment poured into the nation.
Regarding Vientam, the IFC report stated that if excluding FDI from Hong Kong and Taiwan, the gap between Vietnam and China in FDI attraction in 2017 was relatively small with 36.4 billion USD for China and over 30 billion USD for Vietnam.
Vietnam can satisfy the most demanding investors
In fact, FDI projects coming to China are also those Vietnam needs in the future. Experts from the IFC said that Vietnam is likely to increase FDI attraction from Europe and the United States by drawing additional investments from investors already present in the region and especially China.
Europe's leading investors in China such as Germany, France, and the UK are constantly seeking ways to expand their operations in a number of countries to improve efficiency and limit their investment in one single location, they said.
Vietnam has attracted many multinational corporations in the world like Intel Products Vietnam (IPV), Samsung and LG, and these businesses have made speedy developments in the Southeast Asian country.
IPV General Director Lee Soo Hooi said that Intel can be seen as "a quality certificate" for Vietnam’s business environment that can meet the requirements of the most demanding investors.
Vietnam has attracted more FDI from Europe and the US thanks to additional capital from the investors already operating in the country (Photo: VNA)
Changing the mode of investment
Recently, overseas investment activities across the globe are gradually changing in the mode of investment through value chains. Multinational corporations are turning to new modes of FDI (such as manufacturing and services lease, agricultural contracts, and contract-based franchising, licensing and management) in order to seek better business results.
Previously, multinational corporations made cross-border investments via the direct ownership of overseas facilities, but now they can use the non-equity mode (NEM) of investment. The importance of the method is increasingly widely recognised. This approach allows multinational corporations to coordinate activities in the global value chain through supporting domestic suppliers, thereby strengthening the linkage among Vietnamese suppliers in the value chain.
With the new form, investments will be made through trade contract mechanisms between foreign investors and domestic enterprises, and they are often provisions of brands, intellectual property rights and business know-how, technologies, skills or business processes.
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International experts predict that the new form of investment will quickly become a trend in Vietnam, which aims to attract new-generation FDI.
In order to welcome the new wave of investment, many Vietnamese businesses have actively developed strategies to join the "game" by focusing on investing in technology and training human resources, making use of e-commerce channels and database systems, and accessing artificial intelligence and automation./.
