Vietnam's pharmaceutical industry is entering a historic growth phase, aiming for a market size of USD 20 billion by 2026, yet it has attracted only a modest USD 1.8 billion in foreign direct investment (FDI) so far. This significant gap highlights a massive, untapped potential for pharmaceutical manufacturing. Global pharmaceutical giants like AstraZeneca, Sanofi, Roche, […]
Foreign Direct Investment (FDI) plays a critical role in Vietnam's economic landscape. As we delve into the FDI trends and government policies for 2023-2024, it's crucial to understand the significance of FDI in Vietnam. FDI not only drives economic growth but also transforms industries, creates jobs, and fosters innovation. In this article, we'll analyze FDI capital flows, assess investment opportunities, and explore Vietnamese government policies, providing valuable insights for investors eyeing the dynamic Vietnamese market. Let's embark on this journey to uncover the potential and opportunities within Vietnam's FDI landscape.
FDI Capital Flows in Vietnam in 2023
Analyzing FDI in Vietnam
As of December 20, 2023, foreign investors had injected fresh vitality into Vietnam's economy, with the total newly registered capital, adjusted capital, and capital contributions reaching an impressive $36.6 billion USD. This marks a robust 32.1% increase year-on-year, and while adjusted capital experienced a decline, the overall figure witnessed a slight 0.6% increase compared to the first eleven months of the year.
In this dynamic landscape, 3,188 projects, amounting to $20.19 billion USD, received licenses in 2023. These figures represent a significant upswing, with project numbers surging by 56.5% and the value rising by 62.2% year-on-year. Additionally, 1,262 projects adjusted their investments, contributing over $7.88 billion USD (a 22.1% decrease year-on-year). Moreover, foreign investors engaged in 3,451 capital contribution and share purchase activities, amounting to nearly $8.5 billion USD (a 65.7% year-on-year increase).
By December 20, 2023, FDI project disbursements had reached approximately $23.18 billion USD, reflecting a 3.5% year-on-year increase. On the trade front, exports totaled an estimated $258.8 billion USD, constituting 73.1% of the country's export turnover. Imports by the foreign-invested sector stood at over $210 billion USD, representing 64.2% of Vietnam's total import turnover. Despite a decrease in overall export turnover, the FDI sector boasted a trade surplus of $48.8 billion USD, including crude oil, and nearly $46.9 billion USD, excluding crude oil, while the domestic sector achieved a trade deficit of more than $21.9 billion USD.
Key Sectors and Industries for FDI
Foreign investors displayed a diverse investment pattern, with funds flowing into 18 out of 21 sectors within Vietnam's national economic classification system. Notably, the processing and manufacturing industry led the way with investments exceeding $23.5 billion USD, accounting for an impressive 64.2% of the total and marking a 39.9% year-on-year increase. Real estate secured the second position, attracting over $4.67 billion USD, equivalent to 12.7% of the total, with a 4.8% increase compared to the previous year.
Major Countries Contributing to FDI in Vietnam
The global reach of FDI in Vietnam was apparent, with investors from 111 countries and territories participating in 2023. Singapore retained its status as the top source of foreign investment, contributing approximately $6.8 billion USD, constituting 18.6% of the total FDI in the country. Japan followed closely with over $6.57 billion USD, accounting for 17.9% of the total. Hong Kong (China) came third with a registered capital exceeding $4.68 billion USD, making up 12.8% of the total and experiencing a remarkable 2.1-fold year-on-year increase. Additional major investors included China, The Republic of Korea, Taiwan (China), and others.
Investment Distribution in Cities and Provinces
Newly invested projects continued to gravitate towards cities and provinces known for their advantages in infrastructure, stable human resources, administrative reforms, and proactive investment promotion. Ho Chi Minh City and Hai Phong accounted for a substantial 24.9% of the country's newly registered projects in 2023, further reinforcing their status as preferred investment destinations.
Investment Opportunities in Vietnam in 2024
Prospects for FDI in Vietnam in 2024
In the upcoming year, Vietnam's FDI landscape is poised for continued growth. The nation's stable political environment, strategic geographic location, and growing middle class present a compelling case for investors. Moreover, Vietnam's participation in various free trade agreements, including the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the European Union-Vietnam Free Trade Agreement (EVFTA), further enhances its attractiveness. The diversification of sectors and industries open to foreign investment is expected to remain robust, with a focus on technology, manufacturing, and renewable energy.
Emerging Investment Opportunities in Vietnam
2024 brings forth exciting opportunities across multiple sectors. Vietnam's technology sector is witnessing a surge in innovation and digital transformation, offering investors a chance to participate in the nation's digital evolution. The renewable energy sector is another area of interest, with a growing emphasis on clean energy sources such as solar and wind power. Additionally, healthcare and pharmaceuticals are expected to flourish, driven by increasing healthcare demands and government incentives.
Vietnam's Position in Global Investment
Vietnam's reputation as an attractive investment destination continues to grow on the global stage. Its strategic location within Southeast Asia, coupled with its favorable investment climate, positions Vietnam as a gateway to regional markets. Investors are increasingly looking to diversify their portfolios by tapping into Vietnam's potential, recognizing the nation as an essential player in the global supply chain.
Infrastructure Developments and Government Initiatives
Vietnam's commitment to infrastructure development is unwavering. The government is actively investing in transport, logistics, and energy projects, fostering a conducive environment for businesses to thrive. Initiatives such as the North-South Expressway, expansion of airports, and the development of industrial zones further solidify Vietnam's infrastructure advantage. Additionally, the government's efforts to streamline administrative procedures and improve the ease of doing business are set to make investing in Vietnam even more appealing in 2024.
Vietnamese Government Policies for FDI
Global Anti-Base Erosion Rules
Vietnam is a participant in the Global Anti-Base Erosion Rules, which establish global minimum tax standards. A resolution has been enacted to impose supplementary Corporate Income Tax (CIT) on qualifying taxpayers. Taking effect on January 1, 2024, this resolution ensures Vietnam's alignment with international tax norms. As per the decision of the National Assembly, Vietnam will utilize the generated revenue to establish an investment support fund aimed at attracting strategic investors and providing assistance to domestic businesses in specific sectors.
Resolution 103/2023/QH15: The Economic and Social Development Plan for 2024
Effective November 9, 2023, this resolution focuses on administrative reform, public-private cooperation, and selectively attracting foreign investments in emerging sectors closely linked to the domestic market. The aim is to stimulate growth and enhance economic positioning.
Decision No. 667/QD-TTg: Foreign Investment Cooperation Strategy 2021 - 2030
This strategy outlines nine (09) solutions to improve foreign investment cooperation, including enhancing the business environment, promoting innovation, and modernizing investment promotion efforts. Effective June 2, 2022, it seeks to attract high-quality foreign investments.
Circular 02/2023/TT-NHNN: Debt Restructuring
The circular allows credit institutions to restructure debt repayment terms to support customers facing financial difficulties. Effective from April 24, 2023, until June 30, 2024, it aligns with government efforts to assist distressed customers and promote financial stability.
Final Thoughts
In conclusion, the dynamic landscape of Vietnam offers a wealth of opportunities for foreign direct investment (FDI). Analyzing FDI capital flows in 2023, we've observed consistent growth and a trade surplus, showcasing Vietnam's resilience as an attractive destination for foreign investment. As we look ahead to 2024, emerging prospects, especially in high-tech sectors, hold promise for those considering direct investing.
Vietnam's government policies, as exemplified in Resolution 103/2023/QH15, contribute to the favorable investment climate. These policies emphasize administrative reform, public-private cooperation, and the selective attraction of foreign capital.To navigate this thriving landscape successfully, consider Viettonkin as your partner. With nearly a decade of experience and a comprehensive understanding of foreign investment, we offer expert guidance to facilitate your investment journey. Contact Viettonkin today for invaluable assistance and insights that will lead you toward your investment goals.
