HCM City (VNS) — Foreign capital flowing into Viet Nam reached a record high last year, promising more economic growth but more competition for domestic companies.
According to the General Statistics Office, there were over 2,000 FDI projects with total capital of US$15.6 billion, along with another 814 projects expanding their investment to $7.2 billion by the end of 2015, a year-on-year increase of 12.5 per cent.
One of the most significant FDI projects was the South Korean-based Samsung Electronics HCM City CE Complex, which received a licence to add $600 million late last year. This additional capital lifted total investment for Samsung in Sai Gon High-tech Park to $2 billion.
When it is finished, the plant will be one of Samsung’s four biggest in the world.
The project is expected to improve human resources, develop local supply systems, and increase domestic enterprises‘ competitive capability in joining global supply chains.
Last year, South Korea became the biggest investor in Viet Nam with a series of huge projects at total capital of $2.67 billion.
„Foreign capital flowing into Viet Nam in the context of deep integration is a very good sign that can help the market become more competitive and force local enterprises to reform and gain more market share,“ economist Dinh The Hien was quoted as saying in the Nguoi Lao Dong (The Labourer) newspaper.
„The problem is the efficiency of national and local policies to attract foreign investment. New investment should avoid labour-intensive industries,“ he added.
The Vietnamese retail market is seen has having high potential thanks to the population of more than 90 million and a growing economy.
Many South Korean, Japanese and Thai retail groups have arrived in Viet Nam, causing concern among local enterprises that foreign commodities would dominate the market.
Many domestic companies admit that their biggest challenge in 2016 will be competition with foreign goods in Viet Nam.
Local enterprises that do not prepare well for the inflow of foreign capital will lose, experts said.
„Integration with the world is a must, but small- and medium-sized enterprises will only have a small market share while foreign companies will take most of it,“ Tran Viet Anh, chairman of HCM City’s Rubber and Plastic Association, said.
Economist Dinh The Hien pointed out that in previous years most local enterprises focused making money in „hot“ fields like real estate and ignored their core businesses.
„Right now, benefits from real estate are not big enough and if local companies do not increase their strength and competitiveness, they will have to close their operation,“ he warned.
„The government should set up a transparent business environment where local and foreign companies can fairly compete. We should stop the situation of foreign companies receiving many incentives, while local enterprises must suffer many cumbersome and barriers,“ he added.
Source: Vietnam News