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Why can Vietnam raise India to become the next “Asian tiger” after China?

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The devastation of the pandemic this year has led to reports of the withdrawal of companies from China and the relocation of its production to Asia. India hopes and will welcome foreign direct investment as a result of the separation of companies from China, but things did not go as expected by New Delhi.

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However, data on foreign direct investment, published by the Department of Industry and Domestic Trade under the Ministry of Trade and Industry for the first quarter, show a decrease of 56% compared to 2019. While FDI was $ 16,330 million in 2019, it fell to $ 6,562 million in 2020.

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ASEAN: Image file

Meanwhile, the country of Southeast Asia Vietnam has become a center of foreign direct investment. In the race to become an Asian tiger, Vietnam’s FDI averaged more than 6% of GDP, the highest rate in any developing country, according to US multinational investment bank and financial services company Morgan Stanley, a strategist on emerging markets Rukir Sharma, quoted in a report by Livemint.

The latest economic data show an 18% increase in exports, with exports of computers / components up 26% and exports of machinery and accessories up 63%.

Over the past few weeks, data from countries such as India, Indonesia and Bangladesh show a race to become the next factory in the world after China. To make the country more attractive, while India and Indonesia have advanced labor law reforms, Bangladesh is reportedly negotiating 17 preferential and free trade agreements.

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The economic success of countries such as China and Singapore is partly due to FDI. China has witnessed FDI growth from $ 11.15 billion in 1992 to a peak of $ 290 billion in 2013. It was from here that the higher cost of labor in the country began to repel investors in Asia.

Investment policies favorable to business, industrial zones, a large number of young workers (60% of the population) made Vietnam an attractive place for investors when flows to China began to decline.

Since then, the country has seen an annual growth rate of 10.4 percent and a record high of 16.12 billion US dollars last year – an overall growth of 81 percent.

Initially, in 2007, Vietnam allowed state-owned enterprises to try to compete with foreign investors when it came to FDI. In 2014, the country witnessed attacks on foreign-owned factories, leading to a ban on state-owned enterprises competing with FDI projects.

This changed for Hanoi as it also closely monitored inflation rates, foreign exchange rates and the political situation.

Former Prime Minister of Vietnam Nguyen Tan Dung, who writes for the World Economic Forum, offers a gem of wisdom about FDI, which other 9 countries of the Association of Southeast Asian Nations – Indonesia, Thailand, Singapore, Malaysia, Philippines, Brunei, Brunei, Brunei , Myanmar (Burma). ), Laos – should be noted.

Dung writes that socio-political stability, the structure of Vietnam’s population, and the vigorous renewal of the business and investment climate have made the country an attractive destination for FDI.

Even during the COVID crisis, the country’s economy is in a good position because the government has introduced tax breaks, deferred tax payments and land use fees for businesses, revised investment legislation and concluded a trade deal with European ones. Union (EU).

Beginning of July 2020; The EU has abolished 85 percent of tariffs on Vietnamese goods, gradually cutting the rest over the next seven years, while FDI worth more than $ 12 billion was registered from January to April 2020.

Countries such as Thailand, the Philippines, Malaysia and Indonesia have experienced political turmoil and uncertainty in recent years, but they need to understand the importance of stability to attract FDI. Similarly, India, which has a population 12 times the population of Vietnam, has not been able to play its “population card” well.

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