As tariffs on imported goods are likely to continue to have a significant impact on domestic and foreign-invested enterprises, accelerating institutional and policy reforms is increasingly important for Vietnam to maintain its attractiveness and competitiveness.
As tariffs on imported goods are likely to continue to have a significant impact on domestic and foreign-invested enterprises, accelerating institutional and policy reforms is increasingly important for Vietnam to maintain its attractiveness and competitiveness.
Domino effect from US tariff policy
In February, US President Donald Trump announced a series of gradually increasing tariffs targeting key US trading partners, including Canada, Mexico and China, as well as tariffs on imported steel and aluminum and a plan to impose reciprocal tariffs worldwide.
This has raised fresh concerns about a global trade war, which could be devastating for struggling economies.
Economists say that Vietnamese enterprises and FDI enterprises in Vietnam do not operate alone but are part of the global supply chain. When the US imposes tariffs on goods from one country, it not only affects exports from that country to the US but also affects suppliers in third countries - including Vietnam.
According to a report by the Vietnam Federation of Commerce and Industry (VCCI), if the US imposes tariffs on products originating from Vietnam, the consequences will not only be limited to domestic enterprises but will also have a strong impact on FDI enterprises. For example, a multinational corporation may have a component manufacturing factory in Vietnam, assemble it in Thailand, and then export it to the US. When the US adjusts tariffs on a link in this chain, businesses will have to re-evaluate their production strategies, posing a difficult problem for Vietnam in retaining investment.
On the other hand, the supply chain of electronic components and electronic products is one of the significant sources of budget revenue and a strength of Vietnam. The potential risks leading to loss or shortage of this source of revenue will lead to mounting difficulties for the goal of economic development and attracting FDI capital.
Regional competition and institutional problems
Economists say that, in the face of external tariff pressures, legal reform will continue to be an important tool for a country to maintain its attractiveness and competitiveness. The Vietnamese government has made significant strides in improving the business environment. However, further improvements are needed to create a more favorable business environment for the business community.
“UK businesses continue to expect continued and deeper improvements. In particular, streamlining customs, tax compliance and licensing processes is seen as a key factor. A fast, efficient and transparent administrative procedure system will significantly facilitate businesses, especially in expanding their operations and accessing markets,” said Mr. Denzel Eades, Chairman of the British Business Association in Vietnam (Britcham).
Mr. Nguyen Quang Vinh, Vice President of the Vietnam Federation of Commerce and Industry (VCCI), emphasized that policy stability is a key factor, because large investors need a business environment with low risk and predictability.
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| Mr. Nguyen Quang Vinh, Vice President of VCCI, Chairman of Vietnam Business Council for Sustainable Development. |
Taking the recent smoke-free industry policy as an example, Mr. Vinh stated that although it was introduced with the goal of prioritizing public health, Vietnam's new tobacco ban from 2025 could have an impact on this industry, especially the risk of reducing FDI attraction in the production, distribution and trading of related products (for example, the field of manufacturing electronic equipment and components - PV).
Previously, the change in the FIT electricity price policy also created a big challenge for FDI enterprises operating in the renewable energy sector in Vietnam. The shift from the fixed preferential electricity purchase price (FIT) mechanism to competitive bidding made investors face more risks, especially in terms of uncertainty in determining electricity prices and the ability to recover capital.
According to VCCI, in the context of countries in the region such as Indonesia, Malaysia, and the Philippines actively improving the investment environment to attract foreign investment capital. With increasingly fierce competition from these countries, Vietnam is facing the risk of FDI shifting if there is no appropriate policy.
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| In 2024, South Korea will be the second largest investor in Vietnam (after Singapore) with nearly 7.06 billion USD. Source: Foreign Investment Agency. |
Mr. Vinh commented that labor costs and tax incentives are no longer absolute advantages, as neighboring countries are also actively adjusting their investment attraction policies. Faced with the above challenges, VCCI recommends that in order to maintain the attractiveness and competitiveness of Vietnam's investment environment, it is necessary to improve the quality of human resources to meet the needs of FDI enterprises in high-tech industries; promote the development of digital infrastructure and logistics to facilitate businesses; and enhance selective incentive policies towards high-value and sustainable industries.
“It is necessary to ensure policy transparency and stability so that businesses can feel secure in long-term investment. Vietnam needs to continuously improve the investment environment and have a flexible FDI attraction strategy to maintain its position in the region,” the VCCI Vice President emphasized.
On the other hand, experts also emphasize that the rise of blockchain, AI, and digital currency is also proof that the future of the world will gradually be completed by technology products. Therefore, a country possessing many sources of technology investment is a strength.
Source: https://baodautu.vn/domino-effect-from-chinh-sach-thue-quan-cua-my-d250210.html
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