According to the 2020 investment strategy report of Rong Viet Securities Joint Stock Company entitled "Great opportunities often come in difficult times", exchange rate stability is one of the most noticeable points in Vietnam macroeconomic management in 2019. As of December 15, the exchange rate on the banking market and the free market remained unchanged while the central exchange rate increased by 1.8%, accumulating and balanced with the exchange rate on the market.
Looking back on the path of the central exchange rate in 2019, the intertwining adjustment is the sideways when the exchange rate on the market fluctuated. This is probably the SBV's operating art in stabilizing market sentiment.
In 2019, the total amount of foreign exchange supply remained stable as the main highlight helping to regulate the exchange rate as well as increase foreign exchange reserves to over 73 billion USD. While the amount of remittances is estimated at US $ 16 billion, the disbursed FDI inflows reached US $ 20 billion, growing 8% per year. The report noted concerns regarding the prospect of FDI when the totally new and additional investment capital in 2019 decreased by 11% over the same period. However, the research team also said that the supply of foreign currency from FDI inflows will still be positive in 2020. Instead of paying attention to the growth of total registered capital and the additional capital, the report is more focused on the number of investment projects that can be disbursed right in the year as well as the characteristics of projects.
Looking back to the period 2017-2018, registered FDI inflows have contributed from billion-dollar projects in the field of energy and real estate. In 2017, billion-dollar thermoelectric projects were mostly slow in the disbursement progress due to the capital mobilization process and environmental impact assessment. For example, Van Phong 1 Thermal Power Project was proposed by Sumitomo in 2006, granted investment certificate at the end of 2017, and approved by the Ministry of Natural Resources and Environment for assessment of environmental impact and early expectations that the work could be started in the second half of 2019.
However, in 2019, despite the absence of billion-dollar projects, the number of mid-sized projects, USD 100-500 million and focusing on manufacturing and processing activities increased significantly. In the Red River Delta, the number of newly registered projects in Hanoi, Bac Ninh, Thai Nguyen, Bac Giang, Hai Duong, and Ha Nam grew suddenly over 20% over the same period and focused on the sector of manufacturing electrical equipment, electronic.
In the Southeast region, Ho Chi Minh, Binh Duong, and Long An are still provinces attracting new registered FDI capital. In addition, the distribution of FDI projects in 2019 is quite wide when there are mid-range projects in Nghe An, Binh Phuoc, Tay Ninh, Tien Giang, ...
In the near future, the research team maintains optimism about the prospect of attracting FDI into Vietnam. In addition to diversifying trade partners, successfully signing new-generation free trade agreements, the private sector in Vietnam is actively investing in order to participate more deeply in global production chains.
Based on Vietnam's current strength and the classification of production value chains, the report suggests that investment projects will come from three main groups, including labor-intensive goods (textiles and furniture), regional processing & trading (food, paper, plastic and rubber, metal products, and construction materials) and global innovation (manufacturing computers, phones, and electronic components). In particular, the last group mainly relies on the value chain created by large FDI enterprises such as Samsung, LG, Microsoft, ...
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However, the report says that exchange rates in 2020 are still a mystery when the risk of US tariffs on Vietnamese goods is increasing. Vietnam currently ranks fifth on the US trade deficit list, behind only Japan, Germany, Mexico, and China, with exports to the US market increased by nearly 30% over the same period in 2019. While the report has not recorded the wave of mass production shift to Vietnam, Vietnam's current production conditions are difficult to compare with the above countries and the trade deficit of USD 43 billion is truly difficult to imagine.
The fraud of goods origin (Phantom trade), which implies that businesses move goods to a third country before exporting to the final destination to avoid trade tax barriers, is taking place in Vietnam. While the trade surplus with the US increased 33% over the same period, the trade deficit with China increased by over 40% over the same period.
In Liu and Shi's 2016 "Anti-dumping Duty Circumvention through Trade Re-routing: Evidence from Chinese Exporters", the author gave a lot of evidence on the causal relationship between the US tax increase on Chinese goods and the flows of goods to third countries.
There are two notable conclusions, including:
The US raises tariffs on Chinese goods leading to a situation in which goods from China pass through a third country before being exported to the US.
Countries with the geographic location near the US and China or large Chinese population community often become a transit point for Chinese goods to avoid taxes.
Therefore, more than ever, the control role of the Government is extremely important at this time.
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