Vietnam: Investing in Vietnam
Global foreign direct investment (FDI) flows showed a strong rebound in 2021, up 77% to an estimated USD 1.65 trillion, from 929 billion in 2020, surpassing their pre-COVID19 level. FDI flows in developing countries increased by 30% but almost three quarters of the total increase in global FDI (USD 500 billion) was recorder in developed economies, with developing economies showing a more modest recovery growth. FDI inflows in South-East Asia increased by 35% in 2021 to 184 billion USD (UNCTAD, January 2022).
Vietnam's FDI inflows in 2020 amounted to USD 16 billion, unchanged from the previous year, while the total stock of FDI reached USD 177 billion in 2020, according to the UNCTAD's 2021 World Investment Report. FDI was therefore not affected by the global economic crisis triggered by the Covid-19 pandemic. While there were significant contractions in investment in manufacturing and real estate (the two largest recipients last year), an increase in investment in electricity projects offset FDI inflows. In 2020, the most important projects in Vietnam include a USD 5 billion gas-fired power plant proposed by ExxonMobil (USA) and a USD 2.2 billion coal-fired power plant developed by Thai multinationals in the Quang Tri economic zone. Traditionally directed towards the light industry, FDI inflows quickly turn towards heavy industry, real estate and tourism. Inflows are expected to continue, confirming the country's position as one of the most attractive countries in terms of FDI in Asia. The main investor countries are Japan, South Korea and Singapore, with the manufacturing and processing sectors attracting the most FDI followed by real estate and professional activities/science/technology (Trading Economics). However, inflows from major Asian economies (e.g. China, Hong Kong (China), Japan, Republic of Korea), traditionally the largest sources of FDI in Vietnam, declined in 2020.
Vietnam’s FDI and GDP figures suffered and dropped slightly in 2021, due to stringent lockdowns and movement restrictions caused by the pandemic.The latest figures by Vietnam’s Ministry of Planning and Investment (MPI) give an overview of Vietnam’s FDI for 2021. As of December 20, 2021, foreign investment projects disbursed US$19.74 billion a slight decrease by 1.2 percent over the same period in 2020. However, the total newly registered, adjusted, and paid-in capital for share purchase by foreign investors reached US$31.15 billion or 9.2 percent higher than the same period last year.
Vietnam was ranked 70th out of 190 countries in the last World Bank's 2020 Doing Business Report, having fallen one spot in a year. This was despite the country making some progress on the ease of doing business, particularly with regards to paying taxes. Vietnam expects disbursed foreign direct investment to continue to rise as the government steps up efforts to attract factories into the country. There are 19 key sectors attracting FDI inflows. Among them, the processing and manufacturing sector accounted for the highest proportion with $13.6 billion, accounting for 47.7 per cent of total investment capital. Electricity production and distribution ranked second with investment capital of over $5.1 billion, accounting for 18 per cent of the total registered investment capital. It is followed by real estate, wholesale and retail with the total registered capital of nearly $4.2 billion and $1.6 billion. The Ministry of Planning and Investment aims to draw more FDI into areas including export-oriented, energy and high-technology by building a more business-friendly environment.
Foreign Direct Investment | 2019 | 2020 | 2021 |
FDI Inward Flow (million USD) | 16,120 | 15,800 | 15,660 |
FDI Stock (million USD) | 161,111 | 176,911 | 192,571 |
Number of Greenfield Investments* | 276 | 133 | 127 |
Value of Greenfield Investments (million USD) | 31,032 | 10,657 | 11,479 |
Source: UNCTAD, Latest available data
Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.
Country Comparison For the Protection of Investors | Vietnam | East Asia & Pacific | United States | Germany |
Index of Transaction Transparency* | 7.0 | 5.9 | 7.0 | 5.0 |
Index of Manager’s Responsibility** | 4.0 | 5.2 | 9.0 | 5.0 |
Index of Shareholders’ Power*** | 2.0 | 6.7 | 9.0 | 5.0 |
Source: Doing Business, Latest available data
Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action.
The main strengths of the country's economy are:
The main obstacles to the development of the country are:
The promotion of foreign investments is part of Vietnam's development strategy. To that end, the government is improving its judicial system, creating more incentives and taxation policies for foreign investors and trying to respect its commitments with regard to the international community. "Business Forums", opportunities for foreign investors to establish fruitful dialogue and to assert their interests, are frequently organised between the Vietnamese government and the private sector. Additionally, Vietnamese efforts to maintain socio-political stability and set up and professionalise investment promotion activities also play a crucial role in increasing the FDI flow. Recent moves to diversify the economy and shift to high value-added industries also demonstrate the country's desire to attract new types of FDI.
In 2019, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) went into effect, and Vietnamese officials approved the EU-Vietnam Free Trade Agreement (EVFTA) in late 2020. Such agreements ease FDI inflows into the country, offer better market entry for Vietnamese exports, and promote reforms that assist all foreign investors.
Any Comment About This Content? Report It to Us.
© eexpand, All Rights Reserved.
Latest Update: March 2023