FDI inflows remains spotlight of Vietnam's economy

Vietnam remains a preferred destination for foreign investors as actual disbursement of foreign direct investment (FDI) rose by 6.7% year-on-year in the first five months of this year to US$7.15 billion.

Electronics production at Rhythm Precision Vietnam in Noi Bai industrial park. Photo: Pham Hung

During the period, FDI commitments to the country also slightly rose by 0.8% year-on-year to nearly US$14 billion.

In late May, local authorities in the southern province of Binh Duong issued investment licenses for five foreign projects with a combined investment capital of nearly US$1 billion. Hanoi has also seen a surge in the number of new FDI projects with 16 in the month. The total capital poured into new and existing FDI projects in the capital city hit nearly US$520 million, including US$76.8 million for 139 projects. 

Since early 2021, Long An province in the south of Vietnam has emerged as the magnet for large scale projects, including the Long An I and II liquefied natural gas plants worth a total of US$3.1 billion from Singaporean investors, or the O Mon II Thermal Power Plant financed by Japanese investors with registered capital of US$1.31 billion. In Haiphong, Intel (US) and LG (South Korea) have poured additional funds of US$475 million and US$750 million, respectively on their existing plans.

Foxconn, formally known as Hon Hai Precision Industry, is currently exploring an investment option at Thanh Hoa province to set up an industrial park of 150 hectares with a capital of US$1.3 billion. AVG Capital Partners from Russia has also signed a memorandum of understanding with Thanh Hoa’s authorities to develop a US$1.4-billion pork processing complex.

Overall, 70 countries and territories have registered investment projects in Vietnam during the January-May period, a positive sign for the country as the UN Conference on Trade and Development (UNCTAD) predicted 2021 would be another difficult year for investment activities globally as a result of the pandemic.

Vice Minister of Planning and Investment Nguyen Thi Bich Ngoc attributed Vietnam’s advantage in FDI attraction to the country’s participation in a number of free trade agreements, including the Regional Comprehensive Economic Partnership (RCEP), the EU-Vietnam Free Trade Agreement (EVFTA) or the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), the so-called next-generation trade deals.

“FTAs give Vietnam a freeway to access markets of 55 countries, including 15 from the G20,” Ngoc noted.

Kenneth Atkinson, board member of the British Chamber of Commerce Vietnam (Britcham) said the fact that Vietnam has been further integrating into the global community, including its mark as the Chair of ASEAN in 2020 and non-permanent member of the UN Security Council for the 2019-2020 period have elevated the country’s status as an attractive destination for FDI inflows.

Efforts needed to stay competitive

With a volume of capital inflows to Vietnam in the five-month period much higher than the figure recorded in the same period last year, Minister of Planning and Investment Nguyen Chi Dung said at a recent conference that the country has been actively promoting high-quality FDI projects with environmentally friendly and modern technologies as key criteria.

“The government has set up an FDI task force to support multinationals and foreign businesses grasping investment opportunities in Vietnam, along with new laws and greater incentives for projects in priority fields,” Dung said.

To further maintain Vietnam’s status as an investment hub, Chairman of the Vietnam Chamber of Commerce and Industry (VCCI) Vu Tien Loc urged the country to have a long-term plan to promote the development of supporting industries.

“This would be the key step for Vietnam to transform its production industry from mainly assembling to creating higher value-added products,” Loc stressed.

Professor Nguyen Thuong Lang from the National Economics University suggested while the government has put up efforts to improve the business environment, each locality should play a more active role in attracting FDI projects.

“Provinces/cities that can quickly address the concern of the businesses and invest substantially in infrastructure systems would have an upper hand in attracting large-scale FDI projects,” he added. 

“A transparent and predictable legal environment would help investors settle down for long-term,” Lang said.