"Ride the Big Wave" and Attract Investment Resources
Vietnam is in a crucial phase of its development. If it can "ride the big wave" and attract investment resources in areas such as artificial intelligence (AI), semiconductor, hydrogen, green development, it will have the opportunity for breakthrough growth and prosperity.
Welcoming the Fourth Investment Boom
A few days ago, Samsung Vietnam celebrated the first anniversary of the establishment of its Research and Development (R&D) Center, located in the West Lake Urban Area (Hanoi). On December 23 last year, marking the 35th anniversary of the Foreign Investment Law (December 1987), Samsung officially inaugurated its new R&D center with a scale of 220 million USD.
This event can be considered a special "gift" for Vietnam, as attracting investment in the R&D sector has been a long-awaited goal. More importantly, Roh Tae-Moon, CEO of Samsung Electronics, stated that Samsung will transform this center not only into the leading R&D center in Southeast Asia but also the number one R&D center globally. Vietnam will not only be a manufacturing hub but also an R&D hub for Samsung globally.
Not long before this event, the LEGO Group officially started the construction of a more than 1.3 billion USD factory in Binh Duong. Remarkably, this is LEGO's first carbon-neutral factory worldwide.
Both of these events have significant implications, marking a crucial turning point towards green investment trends in Vietnam. This is the new generation of investment that Vietnam is aiming for. According to GS-TSKH Nguyen Mai, Chairman of the Foreign Investment Business Association, this is an irreversible trend. Following Vietnam's strong commitments at the 26th UN Framework Convention on Climate Change (COP26), COP27, and more recently COP28, both domestic and foreign investors now need to prioritize and promote green and sustainable growth in their activities.
This marks a major shift in the "substance" of foreign investment into Vietnam. Samsung's establishment of a large-scale R&D center in Vietnam, coupled with the presence of major technology corporations such as Samsung, Intel, LG, Panasonic, Bosch, and more recently Foxconn, Luxshare, Winston, Goertek, has significantly contributed to elevating Vietnam to a higher position in the global value chain.
With these milestones, the fourth wave of foreign investment in Vietnam is believed to be starting. "Vietnam may experience the fourth wave of foreign investment boom," according to Nikkei. The newspaper believes that the visit to Vietnam in September 2023 by U.S. President Joe Biden could stimulate a wave of U.S. investment in Vietnam, creating an opportunity for the fourth wave of foreign investment.
In the past, Vietnam has experienced three waves of foreign investment.
And now, it could be the fourth wave, with a series of large-scale projects in high technology and semiconductor industries pouring in.
Riding the Big Wave
During his visit to Vietnam, billionaire Jensen Huang, Chairman and CEO of Nvidia Corporation (USA), shared a lot about AI and semiconductor industry. "It's a big and fast wave," said Jensen Huang, emphasizing, "Vietnam is at a crucial moment in its development. If it can ride this big wave, Vietnam will grow, prosper, and have vast opportunities."
Vietnam, perhaps, is already prepared to ride the big wave. "Vietnam is not just reacting passively, following, but we are shifting towards proactive creation, seizing opportunities, overcoming challenges, grasping new conditions and opportunities to decide our future. This is important in the current context," shared Nguyen Chi Dung, Minister of Planning and Investment.
To achieve breakthrough growth and realize the aspiration for prosperity, the 13th Party Congress approved the Economic-Social Development Strategy for the 2021-2030 period. One of the emphasized strategic breakthroughs is in science and technology, innovation. This is also the "key" for Vietnam to enhance the quality and efficiency of its economy and innovate its growth model.
"At present, Vietnam wants to shift from traditional labor-intensive industries like textiles, electronics assembly to high-tech industries with high added value. Collaboration with U.S. technology companies, especially those dominating the semiconductor field, AI, will be crucial in restructuring the country's industrial sector," wrote Nikkei.
To accelerate development and promote international cooperation, Vietnam started planning the construction of the National Innovation Center (NIC) five years ago. At the end of October 2023, NIC was officially inaugurated, aiming to be a significant boost for Vietnam's breakthrough development.
"Science, technology, innovation is the shortest path for Vietnam to catch up, advance, and surpass," said Minister Nguyen Chi Dung.
Five years ago, when proposing the idea of building NIC, Minister Nguyen Chi Dung always referred to a "once-in-a-thousand-years" opportunity that Vietnam cannot miss – the fourth industrial revolution. NIC is the "tool," the "key," an important impetus, and a great opportunity for Vietnam to leverage that opportunity, make a leap forward, and become a trillion-dollar economy.
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At that time, playing the role of advisors to Vietnam in building and developing NIC, the Boston Consulting Group (BCG) frankly pointed out that this is an important time to decide whether Vietnam will "move forward" or "fall behind." Many countries have used innovation centers to promote the application of economic strategies based on innovation, such as South Korea, Singapore...
"This is a great opportunity for Vietnam to leap, become a trillion-dollar economy. Vietnam has the foundation to become such an economy," emphasized Chris Malone, CEO of BCG.
Vietnam chose the path of "moving forward," so it has made great efforts to build NIC. At the inauguration of NIC, Minister Nguyen Chi Dung stated that this is how Vietnam enhances its position and role in the regional and global innovation map. NIC is also the "nucleus" attracting investment and developing areas such as AI, semiconductors, green hydrogen, high-tech industries in general... and the starting point for Vietnam to "ride the big wave."
Opportunities to Soar
The economic restructuring project is still being implemented. However, at the 15th National Assembly session, Minister Nguyen Chi Dung stated that, out of 30 targets for economic restructuring by 2025, after nearly 2 years of implementation, only 10 targets can be achieved; 13 targets are difficult to complete and require significant efforts.
Among these, some targets need to be closely monitored, as their implementation is facing many challenges. For example, the target of average labor productivity growth rates in 2021-2022 is estimated at 4.58% and 4.75%, much lower than the average labor productivity growth rate during the 2016-2020 period (6.05%) and lower than the set target (the set target is 6.5%).
Moreover, there haven't been many significant changes in the economic structure and growth model. The speed of productivity increase is low, and the quality has not met expectations. The economic resilience still reveals many limitations.
Specifically, the labor productivity growth rates in 2021 and 2022 are 4.58% and 4.75%, and in 2023, it is estimated to increase by about 4%, lower than the set target of 5.5%. The proportion of processing and manufacturing industry in GDP is increasing slowly, reaching 24.6% in 2021 and 24.8% in 2022.
"The economy still depends a lot on the business sector with foreign direct investment, relying heavily on imports and exports, vulnerable and difficult to recover from global economic fluctuations," Minister Nguyen Chi Dung said with the consensus of many National Assembly deputies.
Clearly, despite many efforts, the Vietnamese economy has not experienced a significant qualitative shift. After 35 years of attracting foreign investment, there are still inherent weaknesses.
"Not only is the technology of many projects at an average level, but more importantly, the ratio of foreign investors investing in R&D is still limited; the goal of technology transfer in the past has not been achieved as expected; the technology spread from foreign-invested enterprises to domestic enterprises has not met the country's development requirements in the coming period," admitted Tran Duy Dong, Deputy Minister of Planning and Investment.
According to a report by the Ministry of Science and Technology, most of the 400 technology transfer contracts by foreign-invested enterprises implemented from July 2018 to the end of 2022 are between parent companies and subsidiaries, without technology transfer contracts with domestic enterprises. And although there are more than 100 large multinational corporations investing in Vietnam, only two corporations, Samsung and LG, have invested in large-scale R&D centers in Hanoi.
This reality indicates that, despite many opportunities, it is not easy for Vietnam to "ride the big wave" and attract investment in areas such as AI, semiconductors. It is also not easy for the Vietnamese economy to take flight.
Remembering the discussion in the National Assembly, Minister of Education and Training Nguyen Kim Son said, "You can't catch... chips" and Nguyen Dinh Cung, former Director of the Central Institute for Economic Management, always told the press that foreign investment is not a "universal key" to open the door for Vietnam to climb higher in the global value chain. Attracting foreign investment and nurturing domestic businesses are essential for the economy to "take off."
Clearly, there is still much work to be done for Vietnam to take flight. Minister Nguyen Chi Dung, during the inauguration of NIC, also said, "This is just the initial result; the journey of innovation and creativity ahead is full of difficulties, challenges, and new demands from reality."
The journey to attract foreign investment and develop the Vietnamese economy is even more challenging.
(To be continued)
Source: Báo ??u T? Online (Dec, 2023)