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The inflows in Vietnam are keeping pace with the advancements in technology

Foreign funding, particularly in science and technology, is increasingly being directed towards Vietnam as it has become an alluring destination. Vietnam is capitalizing on the growing trend of foreign companies investing in the country by implementing policies and offering incentives that encourage investment in high-tech industries and scientific research, particularly with a focus on environmental conservation. Furthermore, the country’s appeal is on the rise due to the improvements in the legal framework for foreign funding and transfer of technology practices at the local level.

Vietnam market situation

In recent years, the number of companies with foreign investment in Vietnam has been steadily increasing, especially after the country signed multiple free trade agreements with bilateral and multilateral partners. According to reports, scientific and technological projects comprised 16.7 per cent of all new projects in 2021.

The popularity of foreign investment in Vietnam is reflected in the fact that in the following year, investors channeled their funds into 19 out of the country’s 21 non-military economic sectors, with science and technology being one of the most highly invested areas. It is becoming more apparent that investors are now prioritizing high value-added industries and cutting-edge technologies, particularly those that are environmentally friendly, as well as looking for fields that show a downward trend in the workforce.

In line with these developments, the Vietnamese government has implemented several programmes aimed at attracting more foreign investment. One such program, the Foreign Investment Cooperation Strategy for 2021-2030, aims to increase the percentage of registered capital from developed countries, as well as expanding the local operations of multinational corporations on Fortune Magazine’s Fortune 500 list by 50%.

Taking advantage of these initiatives, many foreign firms have made Vietnam a top choice as a manufacturing base, including Foxconn, LG, and Samsung. Additionally, global companies such as GE, Panasonic, HP, Bosch, Yamaha, and Piaggio have R&D operations in Vietnam, suggesting the country might soon become a centre for innovation rather than just a manufacturing hub.

Key legal improvements

Vietnam has been actively working to develop a supportive legal framework, sustainable programmes and a conducive ecosystem for foreign investment over the past few decades. In line with this, the country has participated in numerous new-generation free trade agreements (FTAs) that promote trade relations and ease trade barriers to deepen its involvement in global supply chains.

These FTAs have enabled Vietnam to open up its service market, offering foreign investors more liberal policies and fair treatment. To promote equality, the country will not apply measures that limit foreign investment. Moreover, it is continuously expanding the scope of fields where FTA- backed investors can invest in the local market.

To enhance the business climate and attract foreign investment in the science and technology sector, the Vietnamese government issued Decision No.569/QD-TTg. The strategy aims to channel foreign investment into high-tech industries, with environmental protection also being a priority area for edification.

To encourage investments in renewable energy and environmental protection, policies offering incentives to high-tech firms investing in these areas have been laid out. They include preferential tax rates, exemption or deduction of taxes, and waivers on import duties for certain goods used in fixed asset projects. These policies have attracted foreign firms and created opportunities for public-private partnerships, funding large infrastructure projects while easing the government’s financial burden.

Challenges to technology development

Despite Vietnam’s progress in developing an attractive legal framework, challenges still exist that limit investment in science and technology in the country. First off, the country still needs to synchronise its legal and management mechanisms to promote the development of science, technology, and innovation, and to simplify administrative procedures to promote exchange and purchase of sci-tech products in domestic and foreign markets. Improving the intellectual property protection system is also crucial.

Secondly, Vietnam is still facing difficulties in transferring international advanced technologies, indicating the lack of efficiency in technology transfers from foreign firms to Vietnam through investment channels.

It is clear that economic growth related to technological development is supported by R&D activities. Investment from overseas positively affects the innovation of the economy, which is reflected through patent filings, leading to growth in the technological capability and stimulating patent demand. However, while some industries show promise, the country still needs to address the challenge of low GDP contribution from industries that generate the lowest value-added per employee.

Furthermore, attracting foreign investment in science and technology in Vietnam is hindered by the lack of skilled human resources and inadequate R&D infrastructure. These challenges highlight the need for continued efforts to enhance the country’s business climate, overcome regulatory barriers, and attract skilled foreign investors to stimulate innovation and technological growth in Vietnam.

Potential future developments or patterns that may emerge in the coming years

Moving forward, Vietnam will prioritize innovation in fundamental and key industries such as energy, ICT, electronics and telecommunications, mechanical engineering, robot manufacturing, cars, and software manufacturing. As a result, these sectors are expected to attract a significant amount of investment to Vietnam. Experts predict that foreign investment in sci-tech in Vietnam will continue to increase in the coming years, driven by emerging technologies such as AI, the Internet of Things, and blockchain. These are areas where Vietnam shows immense potential and where we can expect to see further investment and collaboration.

Furthermore, the pandemic has accelerated the adoption of digital technology, creating new opportunities for foreign investors in Vietnam’s sci-tech sector. With more businesses and consumers embracing digital solutions, there will be an increasing demand for innovative technologies and services that can assist them in adapting and thriving in the new digital environment. Investments in renewable energy, green agriculture, the consumer goods industry, and green manufacturing to combat global climate change are also promising areas. In recent times, green foreign funding has redirected from traditional industries to higher-tech and cleaner manufacturing sectors. These sectors utilize green and renewable energy, indicating a shift towards a more sustainable future.

For foreign investors looking to capitalize on Vietnam’s inflows aligning with tech advancements, there are several key recommendations to consider:

Stay informed about Vietnam’s tech advancements:

Stay up-to-date on the latest technological developments in Vietnam’s key industries, such as energy, ICT, electronics and telecommunications, mechanical engineering, robotics manufacturing, and software manufacturing. Understanding these advancements will enable you to identify the best investment opportunities and make informed decisions.

Look for innovation opportunities:

Vietnam presents opportunities for investment by leveraging emerging technologies such as AI, the Internet of Things, and blockchain for innovation. Look for companies that are investing in these areas and determine if there is potential for collaboration or investment.

Engage with local partners:

As a foreign investor, it is critical to work with a reputable local partner who understands the market and can assist you in navigating through any regulatory barriers. Having a local partner can also provide valuable insights into the business practices and cultural nuances of the local market.

Focus on sustainability:

With the global shift towards sustainability, Vietnam’s emphasis on renewable energy, green agriculture, and green manufacturing presents significant investment opportunities. Consider investing in companies that actively commit to sustainable practices and contribute to environmental protection while promoting economic growth.

Leverage digital technologies:

The pandemic has accelerated the adoption of digital technology in Vietnam, creating new opportunities for foreign investors. Look for companies that are investing in digital solutions that can help businesses and consumers adapt to the new environment.

Conclusion

In conclusion, Vietnam’s inflows aligning with tech advancements hold great promise for foreign investors. Vietnam’s sci-tech sector expected to continue its growth in the coming years, focusing on fundamental and key industries as well as emerging technologies like AI, IoT, and blockchain. Moreover, the pandemic has accelerated the adoption of digital technology, creating new opportunities for investors. As investments in renewable energy and green manufacturing surge, Vietnam continues to demonstrate its commitment to sustainability. By staying informed on tech advancements, engaging with local partners, and focusing on innovation and sustainability, foreign investors can take advantage of Vietnam’s flourishing sci-tech landscape and contribute to its dynamic growth.

HMLF is always available to offer assistance in understanding the procedures with authorities.

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Harley Miller Law Firm “HMLF”
Head office: 14th floor, HM Town building, 412 Nguyen Thi Minh Khai, Ward 05, District 3, Ho Chi Minh City.
Phone number: +84 937215585
Website: hmlf.vn Email: miller@hmlf.vn

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