As of April 20, 2022, foreign investors have “poured” nearly 11 billion USD in newly registered capital, adjusted and contributed capital for shares purchase, and purchase of capital contribution, which is equivalent to 88.3% compared to the same period of 2021.
In terms of FDI host country, 72 countries have made direct investments in Vietnam in the first 4 months of 2022, which Singapore led the team with the largest total investment of over 3.1 billion USD, comprising 28.8% of the total investment in Vietnam. Korea came second with over 1.82 billion USD, increasing 53.9% from the same period of 2021. Meanwhile, the 1.3 billion USD LEGO project on a large scale drove Denmark to be the third-largest investor, accounting for 12.2% of the total investment.
When it comes to the investment destination, out of 44 invested regions in Vietnam, Binh Duong received the most considerable amount of newly registered capital with nearly 2.35 billion USD, 5 times higher than the 2021 registered capital of the same period. Bac Ninh claimed second place with 1.57 billion USD while Ho Chi Minh City (HCMC) attracted 1.28 billion USD, which are equivalent to 14.5% and 11.8% of the total invested capital, respectively. Yet, regarding new investment projects, foreign investors mostly focused on large cities with developed infrastructure and favorable investment environments, namely HCMC and Hanoi.
The current Vietnamese FDI trends
The positive situation has marked a potential flourishing in the Vietnam FDI environment. Without a doubt, this prospect outlook has revealed continuous and effective support from the Government towards the business community, along with relentless efforts of domestic and foreign enterprises to overcome the pandemic and adapt to the new normal. In this way, enterprises have made a steady, yet firm recovery, maintaining and expanding their production and business activities.
In particular, adjustment and contribution of capital, purchase of shares, and purchase of contributed capital by foreign investors all showed an upswing over the same period in both investment quantity and capital amount. Though newly registered capital decreased sharply, further reducing total investment in the first four months (down 11.7%), the number of new investment projects still increased slightly (0.7%). Specifically, diverse projects on electronic and high-tech products manufacturing and processing have expanded their capital on a large scale. Despite the adverse effects of the Covid-19 pandemic, foreign investors have put their faith and confidence in the economy and investment environment of Vietnam, thereby making new investment decisions as well as expanding existing investments.
In 2021, the Northern key economic zone in Vietnam recorded a significant amount of FDI inflow, yet in the first months of 2022, this capital flow shifted its direction towards Southern provinces, which accounts for over 80% of the total registered capital. In addition, the Southern key economic zone is leading the country in total newly registered capital in processing and manufacturing plant projects with $1.9 billion (as of the first quarter), nearly 4 times higher than in the North. According to economic experts, FDI firms find attraction in the Southern key economic zone because of abundant young labor resources, competitively cheap wages, and a large consumption market.
Meanwhile, the Northern key economic zone continues to develop in the manufacturing of high value-added products. Albeit the insignificant number of newly registered projects in the first three months of this year, the South has enjoyed substantial amounts of increased capital from under-going projects. Remarkably, Singapore adjusted to increase investment capital by nearly 941 million USD on the construction of VSIP urban infrastructure and services. Furthermore, Hong Kong has made commitments to increase the capital amount in Goertek Vina by 206 million USD, further promoting the manufacturing process of electronic components and network equipment. From Korea, an additional 920 million USD was also additionally invested into Samsung Electro-Mechanics in Thai Nguyen.
What future holds for foreign investors in Vietnam?
Mr. Nguyen Hai Minh – Vice President of the European Business Association in Vietnam (Eurocham) assessed the prospects of FDI attraction in Vietnam in the upcoming time. He confidently emphasized that foreign investors consider Vietnam as a spotlight full of potential opportunities.
Similarly, Mr. Phan Huu Thang – Former Director of the Foreign Investment Department (the Ministry of Planning and Investment) firmly believes Vietnam to be a long-term destination for foreign investors with promising new projects under the new normal situation. He also informed that the Government has been perfecting the FDI policy systems and improving FDI management quality in the orientation of digital government. Thus, they can realize the goals for foreign investment in 2022, as well as in the period 2025-2030 in accordance with Resolution 50-NQ/TW.
Currently, the escalation of tension between Russia and Ukraine has a negligible direct impact on the FDI environment in Vietnam as investment from these two countries only accounts for a small proportion of Vietnam’s total investment capital (0.23%). However, in the middle- and long-term, the conflicts might lead to a trend of investments shifting out of Russia and Ukraine, and into Asian countries where the political environment is more stable. Hence, this probably can benefit Vietnam.
Apart from that, the disruption of the supply chain due to the Covid-29 has been exacerbated by the Russia-Ukraine crisis, negatively affecting the supply of raw materials used for Vietnam manufacturing and directly upsetting inflation and growth. Thus, foreign investors in manufacturing should take careful preparation to confront the worst situation.
Under the VUCA (Volatility, Uncertainty, Complexity, and Ambiguity), foreign investors will face lots of challenges and unexpected events which can turn the table around beside the huge potential. Therefore, how can investors in Vietnam overcome and navigate themselves through this fast-changing environment? It is much better if you have a trustworthy, knowledgeable, and professional companion go through with you. Confident in the high-profiled team of experts in the Vietnam market and legal system, Viettonkin willingly helps you to start your new business journey. Contact us now for more information!