FDI lifts Vietnam up global value chain
Vietnam, like many other East and Southeast Asian countries, is further climbing up the global value chain (GVC) thanks to the positive effect of the utilisation of foreign direct investment (FDI), according to the latest report by Hinrich Foundation.
The opportunities are plentiful for countries to move up the global value chain, said Riccardo Crescenzi, Professor of Economic Geography at London School of Economics, at a press conference announcing the report “Climbing up global value chains: Leveraging FDI for economic development” on June 14.
Amidst current challenges, Asian countries can analyse the link between global economic integration and sustainable development, on the basis of which they will be able to adopt support policies encouraging the participation in the GVC to promote sustainable development.
Vietnam’s increasing openness leads to a higher rise in FDI stock as a percentage of GDP, the report said.
“Compared to regional peers, the country changed from one of the most restricted to FDI, to one of the most open.
“One useful change was the revision of the Law on Investment policy, which restricted the ability of the central and subnational government to issue regulations on investment. This change removed uncertainty and overlapping or contradictory legislation.
“Vietnam’s economic model remaining led by FDI but focused on final-stage assembly tasks that depend on imports,” it added.
Crescenzi stressed it is important that the government and enterprises understand exportation activities, from goods to sources of investment to build domestic capacity and create domestic value-added.
Some 68 percent of global FDI flows landed in Asia-Pacific Economic Cooperation (APEC) economies in 2020, compared to less than 50 percent 10 years ago, said Akhmad Bayhaqi, Senior Analyst at APEC Policy Support Unit.
East and Southeast Asian countries, which make up half of the APEC economies, play a critical role in GVC, he noted, adding that the regions have attracted 18.4 percent of the global FDI and served as the “world’s factory” for more than two decades.
Countries holding central positions in the FDI network are also hubs in the global trade network, he said, and it seems that participating in the GVC helps many emerging economies lure investment.
Without creativeness, Vietnam will not be able to improve productivity and struggle to compete, he continued, adding the formula for victory in a global competition is being creative.