No worries about FDI "changing direction" due to counterpart taxes

Ms. Phi Huong Nga, Head of the Department of Industrial and Construction Statistics, General Statistics Office ( Ministry of Finance ).

In your opinion, how does the US trade protection policy affect FDI flows into Vietnam?

During his previous term (January 20, 2017 to January 20, 2021), US President Donald Trump also used tariffs as the “ultimate weapon”. Many tariff policies from 2017-2021 were continued by the successor administration or only partially relaxed. However, Vietnam’s FDI attraction activities are still very positive.

During the 2017-2024 period, Vietnam attracted nearly 289.3 billion USD in registered FDI capital, an average of 36.2 billion USD per year, nearly double the registered FDI capital of the 2010-2016 period (nearly 147.2 billion USD). During the 2017-2024 period, registered FDI capital basically increased every year, except in 2022 when it only attracted 29.2 billion USD due to the severe impact of the Covid-19 pandemic, but in 2023 it reached a record figure of nearly 39.4 billion USD and in 2024 it reached 38.3 billion USD; realized capital in 2024 reached nearly 25.3 billion USD - a record figure since Vietnam attracted FDI.

The above data shows that international investors always believe that Vietnam is a safe and attractive destination because Vietnam has many advantages in attracting foreign investment.

President Donald Trump has returned to the Oval Office for the second time since January 20, 2025, with arguably the strongest trade protectionist policy in history. So what will happen, Madam?

Global trade activities have been experiencing unprecedented fluctuations since Donald Trump took office for his second term. However, in the first quarter of this year, total registered foreign investment capital in Vietnam reached 10.98 billion USD, up 34.7% over the same period last year, including more than 400 projects adjusting their investment capital by 5.16 billion USD, 5 times higher than the same period last year.

Competition in attracting FDI is increasingly fierce, especially attracting high-tech enterprises. Therefore, even though economic leaders, especially the United States, do not have many policies to protect domestic production, Vietnam is still proactively changing to attract FDI.

Specifically, in order to enhance competitiveness in attracting strategic investors in areas with special investment incentives requiring special investment processes and procedures, the National Assembly passed Law No. 57/2024/QH15 amending and supplementing a number of articles of the Law on Planning, the Law on Investment, the Law on Investment under the public-private partnership model and the Law on Bidding, marking an important turning point in perfecting the legal framework on bidding, planning, investment and investment under the public-private partnership model.

In response to the global minimum tax, the Investment Law has officially established the Investment Support Fund from additional corporate income tax revenue according to the regulations against global tax base erosion and other legal sources to stabilize the investment environment, encourage and attract strategic investors, multinational corporations and support domestic enterprises in a number of fields that need investment incentives.

But are those reforms attractive enough for large strategic investors in the new context?

Vietnam has many advantages in attracting FDI. These include stable politics and macro-economy; favorable geographical location, located in the center of the region, easily connecting with major economies; stable economic growth for many years; abundant labor resources with competitive costs; and a large market with nearly 100 million people.

Unlike other countries in the region (except Singapore), businesses operating in Vietnam have the ability to access a large market thanks to 17 signed free trade agreements, making Vietnam an attractive investment destination. Although it cannot avoid the impact of the US Government's trade protection policies, if Vietnamese goods are subject to higher import taxes than other countries, Vietnam is still considered a safe and attractive investment destination in attracting high-quality FDI capital flows and becoming an ideal destination for this capital flow.

Despite its many advantages, Vietnam has been and is continuing to implement many administrative reform measures, perfecting institutions and laws in accordance with international standards. The merger and arrangement of ministries and branches at the central level; the merger of provinces, communes and wards; and the abolition of districts are unprecedented breakthroughs to promote the investment and business environment.

Recently, the Prime Minister issued Official Dispatch 22/CD-TTg requesting ministries, branches and localities to focus on thoroughly reviewing, cutting down and simplifying regulations and administrative procedures related to investment, production, business activities and people's lives, ensuring a reduction of at least 30% of administrative procedure processing time and at least 30% of business costs (compliance costs); abolishing 30% of unnecessary business conditions; and implementing business-related procedures in the electronic environment, ensuring smoothness, continuity and efficiency.

To achieve a minimum GDP growth of 8% this year, it is estimated that about 28 billion USD of FDI capital is needed - breaking the record set in 2024. So, in addition to the above policies, what else is needed?

The new Investment Law, which was amended and took effect at the beginning of this year, has provisions for special investment procedures, which can be called the "green channel". Accordingly, the transition from pre-inspection to post-inspection mechanism aims to shorten the time for implementing investment procedures; create a favorable and competitive mechanism in attracting strategic investors, enhance national competitiveness in attracting investment in high-tech fields, fields with special investment incentives (innovation centers, research and development centers); investment in the field of semiconductor integrated circuit industry, design technology, manufacturing of components, integrated electronic circuits (IC), flexible electronics (PE), chips, semiconductor materials.

In short, investment in the high-tech sector is given special priority, “overcoming barriers”; production of products in the high-tech product category is encouraged to develop to the maximum. With the “green channel” policy in investment being applied, the Investment Support Fund being implemented from 2025, Vietnam will certainly continue to be an attractive destination for foreign investors, especially strategic investors when they move their production bases due to the impact of the US reciprocal tax policy.

Is it understandable that there is not too much concern about FDI capital flows being diverted when reciprocal taxes are implemented without countries reaching an agreement with Washington?

Many large projects in the fields of semiconductors, energy (production of batteries, photovoltaic cells, silicon bars...), production of components, electronic products, products with high added value have recently received new investments and capital expansion, such as the Semiconductor Materials and Equipment Manufacturing, Assembly and Testing Factory of Amkor Technology (Singapore Holding Pte.Ltd) in Bac Ninh, adjusting its investment capital by an additional 1.07 billion USD; LG Display Hai Phong project increased its investment capital by an additional 2.35 billion USD..., showing that the "eagles" still choose Vietnam to make their nests.

The US trade policy is not only directed towards Vietnam, but also towards all countries that have large trade surpluses with the US, without exception. Therefore, there is no need to worry too much about the “eagles” and strategic investors leaving Vietnam, because no economy is absolutely safe, at least during the 4 years of President Donald Trump's administration.

Source: https://baodautu.vn/khong-lo-fdi-doi-huong-do-thue-doi-ung-d273100.html