Doing Business

Unleashing Vietnam’s Potential: A Comprehensive Look at FDI Flow in the First 7 Months of 2023

Trường Lăng

August 14, 2023

Doing Business

Unleashing Vietnam’s Potential: A Comprehensive Look at FDI Flow in the First 7 Months of 2023

Trường Lăng

August 14, 2023

Vietnam, a rising economic powerhouse in Southeast Asia, has witnessed an unprecedented surge in foreign direct investment (FDI) during the first seven months of 2023. This remarkable growth has caught the attention of global investors seeking new business opportunities in the region. In this article, we will explore the highlights of Vietnam’s FDI inflow, examine the upcoming trends that promise lucrative prospects, and offer insights for foreign investors to seize the opportunities in this flourishing market.

Highlights of FDI inflows into Vietnam in the first 7 months of 2023

The year 2023 has seen Vietnam’s economy soar to new heights, marked by a remarkable influx of foreign direct investment (FDI) in the first seven months. This period has been a turning point for the country’s economic landscape, with FDI reaching an astounding total of over $16 billion, a notable 4.5% increase compared to the same period in the previous year. 

FDI projects

There were 1,627 new projects that received investment registration certificates in the first 7 months of 2023, marking a significant 75.5% growth compared to the same period. The overall registered capital for these projects reached nearly 7.94 billion USD, representing a notable 38.6% increase over the same period in 2022. 

The FDI capital inflow in the first months of in Vietnam
The FDI capital inflow into Vietnam in the first 7 months of 2023

Moreover, there have been 736 projects since the beginning of 2023 that registered capital adjustments, increasing by 27.1%. Additionally, foreign investors contributed 1,852 capital contribution and share purchase projects, totaling over 4.14 billion USD, demonstrating a remarkable 60.7% surge.

These impressive figures have ignited a wave of optimism among global investors, making Vietnam an enticing destination for those seeking lucrative business opportunities in Southeast Asia.

Destinations of FDI attractions

Among the cities shining bright in attracting FDI, Hanoi, the capital city of Vietnam, has emerged as a top contender. During the first seven months of 2023, Hanoi attracted a substantial 2.282 billion USD in foreign investment, showcasing its growing significance in the nation’s economic development. This trend reflects the city’s increasing appeal to investors as it offers a conducive business environment and a thriving ecosystem for businesses to flourish.

Graph Top destinations of FDI attraction in Vietnam
Top destinations of FDI attraction in the first 7 months of 2023 in Vietnam

Securing the second spot, Hai Phong achieved a significant milestone with over 2 billion USD registered investment capital. This impressive figure constituted more than 12.3% of the entire national investment capital, displaying an exceptional surge of 96.5% when compared to the same period. Following were Ho Chi Minh City, Bac Giang, Binh Duong, and others.

Regarding the number of FDI projects, Ho Chi Minh City was the frontrunner nationwide. It took the lead in terms of the number of new FDI projects (39.5%), the number of adjusted FDI projects (24.7%), and the number of projects with capital contribution and share purchases (69%).

Top FDI attracting Sectors

Leading in attracting foreign capital was the processing and manufacturing sector, with an impressive total investment capital surpassing 10.93 billion USD. This constituted over 67.3% of the overall registered investment capital. Following closely, the real estate industry took the second position, contributing over 1.61 billion USD, equivalent to more than 9.9% of the total registered investment capital.

Top FDI attracting sectors in the first months of in Vietnam
Top FDI sectors in the first 7 months of 2023

The finance and banking sector, along with professional and scientific and technological activities, secured the third and fourth spots. Their combined total registered capital amounted to over 1.53 billion USD, signifying a remarkable increase of nearly 63.9 times and around 737.6 million USD compared to the same period last year.

Top FDI investors 

Taking the lead, Singapore surged ahead with a substantial investment of nearly 3.64 billion USD, contributing more than 22.4% to the cumulative investment inflow into Vietnam.

Top FDI investors in Vietnam in the first months of
Top investors into Vietnam in the first 7 months of 2023

Of notable importance was South Korea’s FDI trajectory, which witnessed an escalation from 1.2 billion USD in the first 6 months to a commendable 2.34 billion USD after 7 months. This rapid surge indicated a remarkable 1 billion USD investment from South Korean enterprises within just a month. Thus, South Korea became the second-largest FDI investor in the past 7 months, outpacing both Japan and China with the registered capital comprising 14.4% of the total investment. 

A standout project came from LG Innotek, a South Korean giant, which has committed an additional 1 billion USD (spanning 2023-2025) to establishing a new V3 factory in Hai Phong. This strategic investment is estimated at 2,600 jobs created and an annual profit of 400 million USD.

Retaining its position, China held third place, amassing an impressive 2.33 billion USD in registered investment capital. This figure constituted almost 14.4% of the entire investment, reflecting a remarkable growth of 77.8% compared to the same period. 

Behind the figures

The surge in FDI capital can be attributed to several factors that have positioned Vietnam as an ideal investment choice.

After the routine economic evaluation in June, Paulo Medas, the leader of the IMF’s Article IV mission, highlighted that Vietnam, like many countries worldwide, is confronting complex external conditions including a global growth slowdown and escalating interest rates. However, the gradual implementation of monetary strategies, such as lowering interest rates, reducing taxes, and expanding public investments, has effectively mitigated the adverse effects of these challenges.

DBS Bank identified Vietnam as a prime destination for foreign investors due to its transition in production trends, multiple Free Trade Agreements (FTAs), a promising medium-term growth projection of 6-7%, and a rapidly advancing digital ecosystem.

In line with this perspective, credit rating agency S&P Global Ratings suggestd that Vietnam’s youthful, highly educated workforce with competitive skills is a significant attraction for international investors. They also predicted a revival in Vietnam’s economy over the next two years, driven by rising global demand and the country’s gradual resolution of domestic challenges.

The first seven months of 2023 have also showcased the resilience and adaptability of Vietnam’s economy amidst global challenges. Despite uncertainties caused by the pandemic and fluctuations in the global market, Vietnam has demonstrated its capacity to maintain stability and growth, further solidifying its status as an attractive investment destination for foreign investors.

The Upcoming Trends of FDI Inflow into Vietnam: Opportunities for Investors in Promising Sectors

The robust FDI inflow into Vietnam in the first seven months of 2023 has unveiled several promising trends that are expected to shape the investment landscape in the coming years. As the nation continues to attract foreign investors, specific sub-sectors stand out as hotspots for FDI inflow, offering lucrative opportunities for global entrepreneurs seeking to establish a foothold in Vietnam’s flourishing market.

Manufacturing and Export Industries

Vietnam’s manufacturing sector remains a top draw for FDI, driven by its competitive production costs and strategic trade partnerships. The country’s participation in major trade agreements such as the CPTPP and EVFTA has significantly enhanced its export capabilities, attracting investments from global corporations seeking to establish regional production centers. Notably, multinational companies like Samsung, LG, and Foxconn have already made significant FDI commitments in Vietnam, investing in large-scale electronic manufacturing plants. 

In addition, Intel will continue to invest billions of dollars in Vietnam in the near future, after having succeeded with a 1.5 billion USD project in Ho Chi Minh City. Intel is in the process of negotiating with the Vietnamese Government on mechanisms and policies for this project.

At the end of this year, Amkor – a “big player” in the semiconductor industry, with its head office in Arizona (USA) will put a new factory in Bac Ninh into operation. This project has an investment capital of phase I of 500 million USD.

Quanta Computer Corporation (Taiwan – China) has signed an agreement with the People’s Committee of Nam Dinh Province on the development of a large-scale computer manufacturing project.

With an investment of about 120 million USD, Quanta Computer plans to build a factory specializing in manufacturing and processing laptops and desktop computers. This is Quanta’s 9th factory globally, but its first factory in Vietnam. More importantly, Quanta is Apple’s MacBook manufacturing partner. Therefore, their appearance means that Apple is continuing the trend of shifting production to Vietnam.

As Vietnam continues to emerge as a prominent manufacturing hub, sub-sectors like electronics, textiles, and automobile components are expected to witness a surge in FDI projects.

Technology and Innovation

Vietnam’s tech-savvy population and rapid digital transformation have spurred a surge in investments within the technology sector. Startups and tech-based businesses in e-commerce, fintech, and software development have been attracting substantial FDI. For instance, Grab, Southeast Asia’s leading ride-hailing and food delivery platform, has invested heavily in expanding its services in Vietnam. In the upcoming 5 years (2019-2023), Grab plans to inject an extra 500 million USD into Vietnam, aiming to introduce new services and extend its reach in mobility, food delivery, and digital payment solutions. The company also intends to pioneer advancements in mobile technology, financial innovation, and logistics.

The country’s growing middle-class population, coupled with the government’s focus on promoting a digital economy, opens up tremendous opportunities for investors looking to capitalize on the technology-driven growth in Vietnam.

Renewable Energy and Sustainability

Vietnam’s commitment to sustainable development has led to a surge in FDI within the renewable energy sector. The government has been actively promoting renewable energy projects to reduce its dependence on fossil fuels and address environmental concerns. Investments in solar and wind power projects have gained momentum, with several international firms expressing interest in contributing to Vietnam’s green energy initiatives. Notably, the Tokyo Gas Group from Japan has invested in a $250 million wind power project in Tuy Phong, Binh Thuan province. With favorable government policies and a growing emphasis on sustainability, the renewable energy sector holds tremendous potential for foreign investors.

Infrastructure and Real Estate

Vietnam’s rapid urbanization and economic growth have resulted in a surge in demand for infrastructure and real estate development. The government’s focus on expanding transportation networks, modernizing urban areas, and developing smart cities has attracted substantial FDI commitments. Notable projects include the expansion of Tan Son Nhat International Airport in Ho Chi Minh City and the construction of the North-South High-Speed Railway. Foreign investors seeking stable and long-term returns can find promising prospects in Vietnam’s infrastructure and real estate sectors.

Healthcare and Pharmaceutical Industries

As Vietnam’s middle-class population expands, there is a growing demand for improved healthcare services and pharmaceutical products. The government’s efforts to enhance the healthcare system and reduce reliance on imported medicines have created opportunities for FDI in the healthcare and pharmaceutical sectors. Investments in hospital infrastructure, medical equipment manufacturing, and research and development facilities are expected to gain traction.

Final Thoughts

The first seven months of 2023 have proven to be a turning point for FDI inflow into Vietnam, showcasing the country’s immense potential as an investment destination. As we look towards the future, the trends in key sectors such as manufacturing, technology, renewable energy, and infrastructure signal a promising landscape for those who wish to establish a strong foothold in the country. By leveraging market insights, embracing cultural nuances, and collaborating with local partners, investors can unlock the full potential of their ventures in Vietnam.

If you are an ambitious global investor seeking growth and prosperity, Vietnam beckons with open arms. Seize the opportunity, and let Vietnam be the next chapter in your success story!

Ready to embark on your journey to success in Vietnam? Reach out to us today and explore the myriad possibilities that await you in this flourishing Southeast Asian market. Together, we can build a brighter future for your business in Vietnam.

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