Domestic tourism market

Authorities in Bac Giang Province have proposed to upgrade a military airport to a joint-use airport to serve civilian planes.

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Bac Giang, Lang Son and some adjacent provinces mostly use Noi Bai Airport in Hanoi. However, as Noi Bai Airport is becoming more overcrowded, when being asked for opinions on the master plan for airport development during the 2021-2030 period, Bac Giang authorities have proposed to turn Kep Airport into a joint-use airport for both military and civil aviation.

Bac Giang Department of Transport asked the Ministry of Transport to research the issue and submit the project to the prime minister. Kep Airport is located in Huong Giang Commune.

According to Bac Giang authorities, the northern region has three major airports including Noi Bai, Hai Phong and Van Don. However, as the travel demands increase in the future, a new airport or airport upgrade is necessary. Especially with plans to attract more FDI investments for the industry and tourism sector development. The demands for transporting goods to Lang Son Border Gate also has increased greatly so a new airport may be able to create a breakthrough for the local economy.

“Noi Bai Airport is over 150km from Lang Son and some remote areas in Bac Giang. It’s better to have a closer airport,” Bac Giang Department of Transport suggested.

The master plan for airport development during the 2021-2030 period, with a view to 2050, proposed by the Civil Aviation Authority of Vietnam aims to have 26 airports in total by 2030. There will be 14 international airports and 12 domestic airports. Five key airports will be Noi Bai, Tan Son Nhat, Danang, Cam Ranh and Long Thanh.

The total number of airports have been reduced by two compared to the airport development plan to 2020 with a view to 2030. The two airports, Na San and Lai Chau will be built after 2030.

By 2050, Vietnam will have 30 airports including 15 international airports. The plan to build a second airport for Hanoi is estimated to be started in 2040 when the demands are high.

According to the Ministry of Planning and Investment (MPI), newly registered capital, supplemented capital and capital contributions of foreign investors in the first four months of 2020 reached a total of US$12.33 billion, equivalent to 84.5% of the figure for the same period in 2019.

The decrease in FDI pledges in the four-month period was also less than the decrease in the three-month period. This is an indication that the decline of FDI inflow will soon end and it is expected to increase sharply in the near future.

According to economic experts, Vietnam’s successful control of the COVID-19 pandemic will be the driving force to lure FDI inflow into Vietnam in the near future. Not only FDI, Vietnam has the opportunity to attract investors who wish to relocate their projects.

American, Japanese, and European enterprises who intended to move their production out of China due to increasing labour prices and the impacts of the US-China trade war will accelerate this process amid the pressure from the COVID-19 pandemic. Moreover, the transition process will also receive support from their own countries.

Specifically, Japan will spend approximately US$2.2 billion to support Japanese enterprises in relocating their factories to Japan or to diversify production facilities by moving to the Southeast Asia region.

According to Dr. Nguyen Dinh Cung, a member of the Prime Minister’s Economic Advisory Group, before the outbreak of the COVID-19 pandemic, the shift of production chains out of China appeared mainly due to the need to diversify the supply chain and to reduce risks of over-reliance on a single market, the increasing labour costs in China and especially the effect of the US-China trade war.

Amid the development of the pandemic, the trend has become more visible. The production in China has been recovering but production and transportation costs have become more expensive. The COVID-19 pandemic has promoted the shift of investment out of China, the restructuring of the value chain and the trend of bringing production closer to the consumer market.

When the US-China trade war began, Vietnam was forecast to be an attractive location for many foreign investors that may receive a wave of investment movement from China. However, Vietnam has yet to see benefits as expected.

Dr. Nguyen Dinh Cung said that, from the perspective of globalisation, where has better financial efficiency and cheaper costs will attract more investment capital. China became the “factory of the world” because it met the conditions of investors. It means that if Vietnam wants to attract production chains, it needs to meet the above conditions, and even exceed them.

Regarding industry, it is necessary to revise the industrialisation strategy with specific plans for the 2021-2030 period, with a vision to 2045, including solutions to help Vietnamese enterprises to participate in the global supply chain.

The “2019 Supplier Day” event, held for the first time by the US Agency for International Development (USAID) and the American Chamber of Commerce (Amcham) in Hanoi on April 25, 2019, attracted more than 60 Vietnamese suppliers and more than 300 businessmen, including representatives from large US enterprises. The event marked an important development step in the quality and scale of the programme on connecting global value chains in Vietnam.

According to US enterprises, Vietnam is one of the fastest growing economies in the world, particularly in the past two decades. American businesses have looked forward to doing business with Vietnam businesses, helping Vietnamese businesses to participate in global value chains. This was also the clearest evidence of the attractiveness of the Vietnamese market and the most specific opportunity that Vietnamese businesses need to seize.

In fact, there is a wave of enterprises moving away from China and looking to Vietnam, but about 90% of Vietnamese enterprises are currently not ready to provide services for international businesses.

On the other hand, Vietnam needs to have young and high-quality human resources. But Vietnam currently has an aging population and the supply of labour will only be able to meet the demand of the manufacturing and assembly industries in the next 10 years. This is a problem that Vietnam should have a solution for in the near future.

According to Dr. Tran Toan Thang from the National Centre for Socio-Economic Information and Forecast (Ministry of Planning and Investment), FDI attraction is very important but keeping investors, especially large enterprises, is more important. Incentives regarding tax, land, natural resources, and cheap labour can only attract foreign investors but it is difficult to keep them.

If Vietnam wants to keep foreign investors, besides open and transparent business environment, modern and synchronous transport infrastructure, and stable law systems, the country must have high-quality human resources, a large enough domestic market and a system of domestic enterprises capable of providing supporting industry products for FDI enterprises.

Accordingly, Vietnam continued to hold 42nd position out of 131 economies in the annual report (ranked 42 out of 129 economies in 2019).

Thanks to the ranking, Vietnam is first amongst a group of 29 lower-middle income economies, third in Southeast Asia, behind Singapore and Malaysia, and ninth in Asia Pacific.

According to the assessment, Vietnam was hailed in its market and business sophistication, of which its ranking in the index on market capitalisation of listed companies (% of GDP) was up nine places in 2019, climbing nine places in 2020 and exceeding the target set by the Government in Resolution 02/2019/NQ-CP dated January 1, 2019 on the continuation of the main tasks and solutions to improve the business environment and enhance national competitiveness in 2019 towards 2021.

Specifically, in the resolution, the Government has set the target of raising the ranking of the stock market capitalisation index by 10-15 steps, climbing at least five steps in 2019 alone.

According to the WIPO’s rankings since 2017, the index of the capitalisation of listed domestic companies (as a % of GDP) has continuously increased, particularly in 2019 and 2020, moving up 18 places in total.

Regarding the latest rankings, the State Securities Commission said that the result affirms the efforts of the securities sector in managing the stock market, combined with the synchronous coordination between the sector with other relevant ministries and agencies in improving the investment environment, attracting foreign investment capital, promoting administrative reform and perfecting institutions and specialised legal systems.

Vietnam’s GII in 2020 has been praised by the WIPO in achieving a number of notable positive results, including improving the level of business development, general infrastructural improvement and that of innovation output.

The GII rankings in 2020 list the competitiveness of 131 economies based on 80 sub-criteria as compiled by the WIPO, Cornell University and the INSEAD business school.