Despite the global pandemic and the world’s volatile situation, Vietnam remains an attractive destination for Foreign Direct Investment (FDI) in the year 2022. After a long period of being affected by COVID-19, Vietnamese society and economy have adapted to the new normal, taking advantage of the open policies from 2021. Therefore, an increase in FDI in May in the number of new projects and investment in existing projects has shown a strong confidence of foreign firms in the country’s investment environment.
Increase in FDI in May 2022
According to the Ministry of Planning and Investment, total FDI invested in Vietnam in the first 5 months of the year reached $11.71 billion, equivalent to 83.7 percent of that of the same period in 2021. While newly registered capital decreased by 53.4 percent, adjusted capital and contributed capital to purchase shares increased sharply by 45.4 and 51.6 percent respectively. A representative of the General Statistics Office claimed that this data accurately reflects the general recovery and growth trend of the economy, especially in the context of the Russia-Ukraine war and the decline in global FDI inflows.
Specifically, 578 new FDI projects have been granted investment registration certificates, with a total registered capital of roughly $4.12 billion. Furthermore, 395 turns of projects were registered to adjust investment capital. The total registered investment hence raised to over $5.61 billion, being 45.4 percent higher than that of the same period last year. There were also 1,339 times capital contribution buying shares from foreign investors with the total value amounting to over $1.98 billion, which was 51.6 percent greater than that of the same period in 2021.
Overall, FDI enterprises have invested in 18 industries out of 21 national economic sectors. In which, the processing and manufacturing industry was the leading field with a total investment of over $6.8 billion, making up 58.2 percent of the total registered investment capital. Following is the real estate field with a total investment of nearly $3 billion, contributing to more than a quarter of the total registered investment capital. In the next place are the information and communications industry as well as professional science and technology activities with a total registered capital of about $398 million and $374.8 million correspondingly.
Vietnam remains attractive to international investors
In the first 5 months of 2022, it is reported that 79 countries and territories have invested in Vietnam. Among which, Singapore remains the top investor with a $3-billion worth funding, accounting for 25.3 percent of the total investment in Vietnam. In second place was South Korea with over $2.06 billion, which is 17.6 percent of the total investment, higher than that of the same period by 12.6 percent.
Particularly, due to the large-scale Lego project that attracts over $1.3 billion of funding in total, Denmark continues to rank third with a registered investment capital of nearly $1.32 billion, equalling 11.3 percent of the comprehensive one.
Based on the number of projects, Korea still has the most investors making new investment decisions as well as expanding investment projects and contributing capital to buy shares in the first 5 months of 2022. To exemplify, Korean financiers account for 19.4 percent of new projects, 33.9 percent of adjustments, and 36.7 percent of capital contribution and share purchase.
Additionally, according to a recent HSBC survey, 21 percent of Indian businesses operating or intending to operate in Southeast Asia are planning to expand in Vietnam over the next two years. Likewise, 26 percent of Chinese firms have the same intention.
In the past 5 months, foreign investors have funded firms and projects in 48 provinces and cities across the country. Binh Duong has the largest investment capital inflow with a total value of $2.52 billion, equivalent to 21.5 percent of the total capital and nearly 2.3 times higher than that of the same period in 2021. Bac Ninh came second with a total investment capital of around $1.65 billion, accounting for 14.1 percent of total investment. Following is Ho Chi Minh City with foreign funding of over $1.3 billion, which is 11.3 percent of the total capital.
More than 1,500 companies from six of the world’s largest economies participated in the survey and all have operations in Southeast Asia. Three out of ten companies mentioned Vietnam’s skilled workforce as an advantage, while 27 percent noted its competitive wage pricing and economic resilience during the pandemic.
Currently, 39 percent of Indian companies mention the country’s infrastructure as the primary reason for their interest, while 39 percent of US firms cite opportunities to develop and test new products in the market.
Future expectations
As of May 2022, it is estimated that foreign-funded projects have disbursed $7.71 billion, which is 7.8% higher than the same period last year. Meanwhile, FDI pledges, which indicate the size of future FDI disbursements, fell 16.4 percent year on year to $11.71 billion. Besides, in the future, in terms of the number of new projects, foreign investors will still focus on big cities with convenient infrastructure such as Hanoi and Ho Chi Minh City.
Furthermore, as Vietnam is rising as a global production hub thanks to the incentives given by the Government, the trend of shifting investment to Vietnam is not temporary, but strategic and long-term. Therefore, the movement of the FDI flows shows a positive picture in the upcoming years.
If you are looking for opportunities to be a part of the picture, contact Viettonkin Consulting now for more information on how to join the market. Our team of dedicated experts will provide you with more insights about ASEAN’s promising economy and guide you through the process.
