THE IMPACT OF THE COVID-19 PANDEMIC ON FDI TO VIETNAM & ON THE KIZUNA BUSINESS COMMUNITY

Since 2012, KIZUNA has been the pioneer in Vietnam to build and develop a new Industrial Zone model in Industry 4.0 with the type of KIZUNA - Ready Serviced Factory. KIZUNA was founded and managed by Mr. Doan Hong Dung - an expert with more than 30 years of experience in industrial park investment and FDI attraction in Ho Chi Minh City and Long An Province.

Currently, KIZUNA serviced factory complexes have been filled with KIZUNA business community consisting of of nearly 120 manufacturers operating mainly in different industries including supporting, high-tech, electronic components, precision engineering, fashion. In which, nearly 90% are FDI enterprises with more than 40% are Japanese enterprises and about 25% are Korean enterprises.

The COVID-19 epidemic is affecting the global economy, and the manufacturers at KIZUNA are also affected. However, it is believed that KIZUNA company, with its mission of providing an efficient and secure production environment for manufacturers, will work together with the KIZUNA business community to overcome difficulties and continue to grow sustainably after the COVID-19 pandemic ends.

Kizuna’s BOD, along with Kizuna’s foreign expert team who has experiences in attracting FDI in Vietnam, had many online meetings to discuss and assess the situation of FDI attraction in Vietnam in this period.

According to Ms. Shirakawa Satoko - in charge of Japanese businesses account and English-speaking account, the FDI inflows will continue to pour into Vietnam after the COVID-19 epidemic ends, if Vietnam controls the disease well and is able to overcome pandemic with minimal losses and quickly opening the border.

International enterprises continue to leave China to limit the risks faced from 2019 such as riots in Hong Kong and now the Coronavirus, in which Vietnam is a safer destination. Vietnamese society is developing stably, the Vietnamese government has been taking drastic measures to curb and control the epidemic nationwide.

Regarding Japanese enterprises, there is no great benefit from the US-China trade war, but after the COVID-19 pandemic, their FDI into Vietnam will increase. They saw the need to diversify operations from many countries, not depending on China. At present, many Japanese companies have factories in China and import materials from China. Due to this pandemic, logistics between China and Japan have been delayed or stopped and caused major impacts on their production and supply of products and services in Japan.

In addition to reducing production costs, including labor costs when shifting investment into Vietnam, Japanese businesses do not want to be dependent on China to limit risks, which will boost investment into Vietnam more quickly.

During this period, Japanese businesses and companies from English-speaking countries continued to explore the investment environment in Vietnam in general and KIZUNA's newly built factories in particular by online method. Field surveys for investment decisions are postponed due to border closure states. The scale of factory investment is also being considered to match the investment and business plan in the coming time.

According to Mr. Nam Kyoung Wan, in charge of the Korean business sector, the inflows of FDI into Vietnam from China due to the impact of the COVID-19 epidemic are not the same as in 2019 which is affected by the US-China trade war. The COVID-19 epidemic caused production disruptions in the global supply chain.

The global economy will suffer from both sides of supply and demand, unlike other economic crises in the past. Multinational corporations reduce at least 30% of new investments, meaning that FDI inflows will also decrease by 30% compared to the previous year.

In the case of the COVID-19 pandemic not being defeated within 2 months, large companies will be under great pressure due to their financial leverage. In the midst of great financial turmoil, no company can think of investing in other countries, even their own, they're busy surviving the pandemic.

This is the time for the Vietnamese Government to develop policies to be able to retain and help FDI enterprises overcome difficulties. Once FDI investors feel sincere signs of support from the Vietnamese government to cope with the current crisis, they will surely return to larger investments once the situation returns to normal.

Normal production activities of the Aoki Vietnam factory (Japan) on April 1st, 2020.

The COVID-19 epidemic forced many businesses to suspend operations or cut production scale. At KIZUNA, about 25% of businesses have reduced their production capacity, most of them are food processing, manufacturing products for chains of restaurants and hotels that are currently suspended following the behest of the Vietnamese government. Some businesses affected by input materials imported from China were delayed or foreign workers were still unable to return to Vietnam to work after Tet holiday due to the COVID-19 pandemic.

With the mission of bringing an efficient and secure production environment for businesses, KIZUNA not only provides production space with complete and synchronous technical infrastructure and utilities; optimal-designed workshops for production activities; KIZUNA staffs also provide a comprehensive support service ecosystem, accompanying businesses from the time of investment exploration in Vietnam, at KIZUNA, throughout the operation process, bringing sustainable success to the businesses.

In this period, KIZUNA team always works closely with businesses to overcome difficulties. First of all, KIZUNA has extended the payment for workshop rent in Q2/2020 and does not charge interest nor increase the rent compared to the rent in the signed agreement for factories re-contracting. The customer service team always supports businesses on time when needed, supports guidance and complies with regulations for foreign labor experts, updates the guidelines of the authorities, tax departments, banks, etc. to help customers reduce financial pressure during this period, encourage and support businesses to expand the domestic market with appropriate business channels.

KIZUNA has also developed a Business Continuity Plan with a variety of scenarios, developing a process to respond to incidents that occurred during the COVID-19 pandemic. KIZUNA Safety Board has propagandized and cooperated with manufacturers operating here to implement measures to limit the spread of disease in the KIZUNA business community according to the government’s instructions, regulations of local regulatory agencies, and guidelines of the National Steering Committee for COVID-19 Disease Prevention and Control.

With the actions that the Vietnamese government is taking in response to the COVID-19 pandemic, in parallel with the development of policies to support existing FDI enterprises and attract FDI enterprises in the future, along with the shift of investment out of China to minimize risks, and the investment opportunity in Vietnam to enjoy the advantages brought by trade agreements of international enterprises, the FDI inflows into Vietnam will continue to grow in the future.

KIZUNA - Ready Serviced Space project at KIZUNA 3 Ready Serviced Factory is urgently investing in construction and putting into use in Q4/2020 to continue attracting FDI into Vietnam after the Covid- 19

Currently, KIZUNA is urgently working on the construction of KIZUNA - Ready Serviced Space project at KIZUNA 3 Ready Serviced Factory in Can Giuoc District - Long An Province with 2 blocks of 4-story ready-built workshops with the area of 80,000m2, ready to hand over and put into use in Q4/2020 to attract FDI inflows to Vietnam after the COVID-19 pandemic.

For more details of the project: https://www.kizuna.vn/ready-serviced-space/

We believe that, with the current national industrial development strategy, Vietnam continues to be one of the destinations to attract FDI in the world with an increasingly efficient, safe and transparent investment environment.