FDI

Vietnam Economy Growth Despite Pandemic – Business opportunities in Vietnam

Tra Mac

March 12, 2021

Perhaps it is relevant to say that in 2020, Vietnam is an exception by continuing to show its role as the center of trade flows. Despite of Covid-19, this Vietnam economy remains steadfast in maintaining positive growth. Fitch Solutions has raised their GDP growth forecast for Vietnam in 2021 to 8.6%, from 8.2% in the previous report. Thus, this may be a good sign for a rebound in 2021. 

READ MORE: How does Vietnam reap benefit from RCEP?


Vietnam Economy executive summary

FDI projects peaked in 2019 

Some of 4,028 projects were recorded in 2019. This was the year in which the highest numbers of projects were recorded. During this period, a total of USD 38,952 million capital was invested by these projects with average implementation capital at USD 5 million. 

Key investors accounted for more than a half of projects

The top 10 biggest investors  contributed over half of total registered capital. Korea was the largest investor with accumulated capital at over USD 60 million, followed by Japanese investors with the average capital per project double than that of the Korean project. China, Taiwan and Singapore were also the pivotal partners of Vietnam. 

In 2020, Singapore is the largest investor with 8.07 billion USD, followed by Korea, China, and Japan.

Manufacturing is top sector with a half of projects 

Total registered capital and average registered capital per project was USD 363,310 million and USD 11.7 respectively. Real estate activities was the second sector receiving the largest capital. 

Priority sectors after the COVID-19 pandemic in Vietnam are electricity, electronics, supporting industries in these industries, pharmaceutical manufacturing, medical equipment, digital technology, digital banking, … Another area is heavy industry: gas power, wind power, solar energy, electrochemical oil, and LNG (the US investors).

Top three destinations attracted more than two-third of projects

Lao is the top destination accounting for more than one-third of projects tracked. Cambodia was the second largest destination with 180 projects. The figure for Malaysia was 21 projects. Vietnamese investors invested abroad mostly in agriculture, forestry and fishing; and mining and quarrying. 

M&A in Vietnam is expected to increasingly attract more investors, especially in industrial real estate, manufacturing, construction banking and retailing. 

The market continues to be led by foreign investors, focusing on 4 countries: Japan, Korea, Thailand and Singapore.

Vietnam economy is one of the top FDI host countries for investors thanks to containing the pandemic well. Companies intently moving factories out of China may consider Vietnam as an ideal destination for manufacturing. 

RCEP and EVFTA boost Vietnam economy supply chain as well as attract more FDI investment. However, Vietnam also faces a lot of challenges in fierce competition. 


Vietnam economy post-Covid

Vietnam econom post pandemic situation

Vietnam economy ranks 3rd in the world in terms of the economic expectation index

The Gallup International International Association recently announced that Vietnam economy ranks 3rd in the world in terms of the economic expectation index at 45%, behind Nigeria and Azerbaijan. The survey was conducted with 38,000 people in 41 countries around the world.

The comment is made before the results that Vietnam has achieved in 2020. Specifically, despite the sharp decline in growth and most economic indicators, Vietnam is among the few countries that still keep GDP growth rate of 2.91%; Despite the highest inflation rate in the past 5 years, but still within the allowed range of the National Assembly, reaching less than 4% …

Import and export activities still maintain a positive increase

Despite the effect of Covid-19, Vietnam’s import and export activities still maintain a positive increase, in which the domestic economy marks considerable contribution. In the first 10 months of  2020, Vietnam enjoyed a trade surplus record of above USD 19 billion.

With calculated results, if the level below 5% is considered a small impact, a decrease of 5-10% is considered a moderate impact and a reduction of more than 10% is considered a strong impact. 

Industrial production continues to flourish, especially the processing and manufacturing.

Due to Vietnam’s well control over COVID-19 pandemic, sectors of the economy are entering a state of stable operation under new normal conditions. Industrial production in October 2020 continues to flourish, especially in the industry of processing and manufacturing.

However, the COVID-19 pandemic has also affected many industries of manufacturing in three aspects. 

The main export industries

This field is being negatively affected by erupted global supply chains, causing a shortage of inputs. Many manufacturing industries under the supply chain model such as telephones, electronics, computers, textiles, footwear, agricultural production – processing, cars – motorcycles, iron-cast, petrochemical refining… are all heavily dependent on imported raw materials and fuels, mainly China, South Korea and Japan.


Investment status in Vietnam 2021

Although all economies affected heavily during the COVID-19, manufacturing in Vietnam continuously expand. There are some investment opportunities in Vietnam for foreign investors:

Some advantages of the investment environment in Vietnam

(1) Political stability: Vietnam has political stability for a long time before the COVID-19

outbreak.

(2) Vietnam is a large market with a population of about 100 million people.

(3) Rapid and sustainable economic growth.

(4) Abundant human resources: cheap, skilled labor.

The Ministry of Labor strengthened human resources with the 9+ program, meaning that from

high school, it was possible to study vocational programs, not to finish grade 12 to be eligible.

(5) Competitive costs,

(6) Attractive incentives,

(7) The increasingly integrated economy

(8) Favorable geographical location.

The business investment environment continues to be improved, especially in 2021

The state will amend many important laws that affect the business environment. New legal and policy systems are being completed day by day with the new Law on Investment, Law on Enterprise, and Law on Public-Private Partnership (PPP) coming into effect from January 1, 2021.

Currently, the Ministry of Planning and Development is working with other Ministries, branches to draft legal documents to promulgate and take effect from the beginning of 2021.

Vietnam has a lot of potentials when signing 14 FTA agreements, including 3 new FTAs: CTPPP, EVFTA, RECEP. These are favorable conditions for Vietnamese enterprises to export goods to the world.

The success in controlling the COVID-19 epidemic in Vietnam in recent years has also created foreign investors; confidence in the government. This has enhanced Vietnam’s reputation as an attractive and safe investment destination. This is the most important thing to help Vietnam overcome all the challenges during the COVID-19 pandemic.

The Deputy Minister believes that Vietnam is one of the most attracted FDI destinations with lots of advantages, but we also need to care about other countries such as India, Indonesia,…

Related posts

FDI

The process and opportunities of Mergers and Acquisitions (M&A) in Vietnam

In a pre-Covid world, the activity of M&A in Vietnam had steadily grown with the total value of transactions reaching US$10 billion in 2018 and ...

Read more
FDI

Vietnam FDI Opportunities in 2021

After Covid- 19, Vietnam is considered to be a “rare”, “golden opportunity” for a “spectacular change” in attracting FDI capital. However, according to the experts, ...

Read more
FDI

M&A in vietnam – Mergers And Acquisitions mistakes to avoid in Vietnam – Viettonkin

Mergers and Acquisitions function as a double-blade that can create or destroy a company. At worst, a disastrous deal can cost the company millions of ...

Read more
FDI

Best locations to start a manufacturing business in Vietnam

Whether you are looking to outsource your business’ operations to Vietnam or setting up a business, choosing a location for manufacturing activities in Vietnam can ...

Read more
How can we help you thrive? Let's work together