FDI companies in Vietnam have consistently played a crucial role in contributing to Vietnam's economy and its growth. Since the authorization of foreign investment in 1988, Vietnam FDI has been pivotal in transforming the country into a highly appealing destination for international investors. The country’s robust growth in securing FDI has garnered positive feedback from […]
FDI companies in Vietnam have consistently played a crucial role in contributing to Vietnam's economy and its growth. Since the authorization of foreign investment in 1988, Vietnam FDI has been pivotal in transforming the country into a highly appealing destination for international investors. The country’s robust growth in securing FDI has garnered positive feedback from […]
Foreign Direct Investment (FDI) plays a critical role in Vietnam's economic landscape. As we delve into the FDItrends 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 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).
Foreign investors injected fresh vitality into Vietnam's economy.
By December 20, 2023, FDI project disbursements 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.
Foreign investors displayed a diverse investment pattern.
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.
The global reach of FDI in Vietnam was apparent, with investors from 111 countries and territories.
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.
Newly invested projects continued to gravitate towards cities and provinces known for their FDI advantages.
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 a 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 from 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 from 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.
This strategy outlines nine (09) solutions to improve foreign investment cooperation, including enhancing the business environment, promoting innovation, and modernizing investment promotion efforts. Effective from 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 selective attraction of foreign capital. Click here to access the infographic and make data-driven decisions for your business success.
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.
Foreign Direct Investment (FDI), as a critical driver of global economic growth, often presents a myriad of challenges for investors venturing into new markets. Understanding the significance of FDI and the complexities it entails, particularly the need for reliable investment advisoryservices and knowledgeable consultants, is essential. Successfully navigating the intricate landscape of FDI requires a comprehensive understanding of market nuances, regulatory compliance, and risk mitigation strategies.
Exploring FDI Advisory Services
Unveiling the Scope of Foreign Direct Investment (FDI) Advisory Services
Foreign Direct Investment (FDI) Advisory Services encompass a wide array of strategic offerings designed to guide foreign investors through the complexities of entering and succeeding in a new market. These services provide a comprehensive understanding of local market nuances, regulatory requirements, and risk assessments. FDI Advisory Services are a beacon of clarity in the often murky waters of international investments.
These services offer thorough market research and analysis, providing investors with essential insights into local economic conditions, consumer behavior, and industry trends. By unraveling the intricacies of the target market, advisory services enable investors to make well-informed decisions that are tailored to the unique demands of their chosen destination.
Key Components of FDI Advisory Services
The key elements of FDI Advisory Services serve as the foundational pillars of a prosperous investment strategy.
Market Research and Analysis: Thorough market research is the bedrock of sound investment decisions. FDI Advisory Services conduct in-depth market analysis to identify emerging trends, consumer preferences, and potential competitors. Armed with this information, investors can tailor their strategies to capture market opportunities effectively.
Financial Planning: Investment decisions often hinge on financial considerations. Advisory services assist investors in financial planning, including budgeting, risk assessment, and investment modeling. These services ensure that investors are well-prepared for the financial aspects of their market entry.
Market Entry Strategies: The choice of the right market entry strategy can significantly impact an investment's success. FDI Advisory Services help investors identify the most suitable strategy, whether it's through joint ventures, mergers and acquisitions, or setting up new ventures. Selecting the right strategy ensures that investors enter the market with a strong competitive edge.
Thorough market research is the bedrock of sound investment decisions. Source: Internet
The Benefits of Collaborating with an FDI Consultant
Collaborating with an FDI consultant is akin to having a seasoned guide in an uncharted territory. These professionals bring extensive experience and knowledge to the table, offering valuable insights and strategic direction to investors. By partnering with an FDI consultant, investors can navigate the complexities of foreign investments with confidence and precision.
One of the most significant benefits is risk mitigation. FDI consultants have encountered various market scenarios and are adept at identifying potential risks. Their guidance helps investors anticipate and mitigate challenges effectively, reducing the chances of costly mistakes.
Moreover, FDI consultants offer a nuanced understanding of the local business culture, which is often critical to building successful relationships and partnerships in a foreign market. Their local knowledge facilitates smoother negotiations, partnerships, and collaborations.
Collaborating with an FDI consultant is akin to having a seasoned guide in an uncharted territory. Source: Internet
The Importance of FDI Advisory Services
Leveraging FDI Advisory Services for Successful Investments
In the intricate world of foreign investments, leveraging FDI Advisory Services becomes increasingly vital, especially when we consider specific examples. For instance, an investor looking to enter the vibrant market of Vietnam may face a maze of regulatory requirements, cultural differences, and competitive challenges. FDI Advisory Services can provide essential insights into the nuances of the Vietnamese market, helping the investor not only meet legal obligations but also establish strong local partnerships. Similar challenges arise when investing in highly regulated industries like healthcare or finance. Advisors well-versed in these sectors can guide investors through the intricacies, ensuring compliance and sustainable growth.
Realizing Success with FDI Advisor Guidance
Success in foreign investments is often intricately linked to the ability to adapt and innovate within a specific market. Let's consider the case of an investor seeking opportunities in the renewable energy sector. FDI Advisors with expertise in renewable energy can offer tailored strategies, considering factors like local energy policies, competition, and environmental concerns. By providing guidance on navigating these complex aspects, FDI Advisors facilitate the identification of lucrative projects and the execution of sustainable business plans.
Risks of Overlooking Professional Foreign Direct Investment Advisory Services
The risks of overlooking the professional guidance of FDI Advisory Services are significant. For instance, a company aiming to expand its tech-related investments into a foreign market may encounter difficulties without a deep understanding of local regulations and the competitive landscape. These challenges can result in delayed market entry and lost opportunities.
Moreover, in the pharmaceutical industry, a failure to adhere to intricate drug approval processes or regulatory compliance can result in substantial financial losses and damage to a company's reputation. Such risks can be mitigated with the support of FDI Advisors who specialize in these areas, ensuring a smoother and more profitable investment journey.
Viettonkin's FDI Advisory Services
Viettonkin's Vision and Commitment
Viettonkin, founded in 2009 with deep roots in the ASEAN region, has set an ambitious vision. By 2025, it aspires to become one of the top five leading FDI-focused consulting firms and business consultants in Southeast Asia. Looking ahead to 2040, the goal is to establish a global presence as a one-stop solution hub, catering to the diverse professional and corporate needs of multinational businesses worldwide. Viettonkin's unwavering commitment to this vision positions it as the trusted partner for foreign investors seeking to expand their reach.
Viettonkin Consulting is a multi-disciplinary group of consulting firms.
A Closer Look at Viettonkin's Expert FDI Advisory Services
Viettonkin's FDI advisory services play a significant role in realizing its vision. This service equips clients with the knowledge and support needed to venture into new markets, whether locally or internationally. The secret to every successful expansion lies in careful planning, calculated risks, and in-depth research. Viettonkin proudly offers a comprehensive suite of services, including pre-feasibility studies, feasibility studies, market research, business matching, business travel support, and business development consulting. These services are meticulously designed to address clients' specific needs and challenges, ensuring that their expansion efforts are guided by expert insights and strategic direction.
Final Thoughts
In summary, Foreign Direct Investment (FDI) Advisory Services emerge as the central driving force behind successful foreign investments. The professional guidance of FDI advisors is the compass that helps investors navigate the complexities of foreign markets, minimize risks, and maximize opportunities. Unlock new investment possibilities with Viettonkin's FDI Advisory Services. Visit our website or reach out to our expert advisors to explore our comprehensive investment solutions. Let Viettonkin be your guide through a seamless and profitable FDI journey, transforming your global investment aspirations into a reality.
FDI in Vietnam is the driving force behind the nation's economic expansion. As an attractive destination for foreign investment,Vietnam's growth is propelled by a strategic approach to welcoming investors. In this article, we explore the dynamics of foreign direct investment in Vietnam and recommend steps for further enhancing its investment landscape. By examining key sectors for investment and emerging trends, we aim to provide valuable insights into how the country can continue to attract investors and diversify its sources of FDI. As Vietnam continues to evolve, understanding its FDI landscape is essential for investors, businesses, and policymakers alike.
Current Landscape of FDI in Vietnam
Overview of the Current State of FDI in Vietnam
As of September 20, 2023, Vietnam continues to be a shining star in the realm of Foreign Direct Investment (FDI). The country has registered a staggering increase in foreign investment, with the total capital reaching nearly 20.21 billion USD, a substantial 7.7% growth compared to the previous year. Particularly noteworthy is the realized FDI capital, which in the first nine months of 2023 amounted to an estimated 15.91 billion USD, marking a remarkable 2.2% increase over the same period in the previous year. This remarkable achievement represents the highest amount of realized FDI in a nine-month period over the past five years. Vietnam's robust economic environment and favorable investment climate continue to make it a top choice for foreign investors.
Accumulating to September 20, 2023, Vietnam boasts a total of 38,379 valid projects, backed by an impressive registered capital of 455.06 billion USD. Notably, the accumulated realized capital from these foreign investment projects has surged to nearly 289.9 billion USD, a figure equivalent to a remarkable 63.7% of the total valid registered investment capital. This data reinforces Vietnam's status as a premier investment destination in the Southeast Asian region.
Analysis of Significant Sectors and Industries Attracting Foreign Investment in Vietnam
Foreign investors are placing their bets on a diverse array of sectors within Vietnam's thriving economy. Out of the 21 sectors classified under the national economic system, foreign capital has flowed into 18, with the processing and manufacturing industry leading the way, accounting for over 14 billion USD. This sector dominates the FDI landscape, making up 69.3% of the total investment and experiencing a robust 15.5% year-on-year growth. Real estate follows with an investment totaling about 1.94 billion USD, contributing 9.6% of the total, despite experiencing a 45% decline compared to the same period last year. Banking and finance and wholesale and retail sectors also experienced significant growth, with investments of 1.54 billion USD (a staggering 63.8-fold increase compared to the previous year) and nearly 734 million USD (an 18.7% annual increase), respectively.
Foreign investors are placing their bets on a diverse array of sectors within Vietnam's thriving economy.
An intriguing highlight is the processing and manufacturing sector, which not only attracted the most newly registered projects (accounting for 32.6%) and capital-adjusted projects (56.3%) but also showcased exceptional performance. Wholesale and retail also led in the number of capital contributions and share purchases, accounting for 41.4%.
Examples of Successful FDI Projects in Vietnam
Vietnam's attractiveness to foreign investors is underscored by several successful ventures. One prominent example is Samsung, which has invested a staggering 20 billion USD in the country, reflecting the scale of foreign interest in Vietnam. LG is another key player with an impressive investment of 7.5 billion USD over the past five years, continuously expanding its presence through capital injections into its factories. Notably, Lego Group of Denmark initiated a momentous project worth over 1.3 billion USD last year. Recognized as the first global carbon-neutral project in Vietnam, this investment aligns with the nation's commitment to achieving net-zero emissions by 2050, signifying a significant shift toward green investments in the region.
The Vietnam-EU Investment Protection Agreement (EVIPA) within the EVFTA framework further entices FDI, particularly from European and preferential tax-seeking countries. The Vietnamese government's proactive stance, in alignment with these FTAs, reinforces the nation's potential to attract foreign investment.
Highlighting the Legal and Administrative Framework Supporting FDI to Vietnam
Vietnam's legal and administrative framework underpins its commitment to attracting and safeguarding foreign investments. It offers a transparent, predictable, and favorable environment for investors. The one-stop-shop system streamlines administrative processes, while mechanisms for dispute resolution instill trust in foreign investors.
Moreover, Vietnam has implemented a range of policies, including Resolution No. 50-NQ/TW, the Law on Technology Transfer 2017, the Law on Investment 2020, and other regulatory decisions, to bolster its investment climate. Recent government decisions, such as Decision No. 29/2021 and Decision No. 667, emphasize special investment incentives and the Foreign Investment Cooperation Strategy for 2021-2030, respectively.
Decision 667 aims to increase the share of foreign investment capital from Asian, European, and U.S. sources to over 70% of total capital disbursed in Vietnam by 2025 and 75% by 2030. The strategy specifically targets leading investors like Singapore, South Korea, Japan, China, Taiwan, as well as countries such as Malaysia, Thailand, India, Indonesia, and the Philippines. Simultaneously, the plan strives to elevate investment from EU partners, including France, Germany, Italy, Spain, Russia, the UK, and the United States.
Additionally, Decision 667 sets an objective to position Vietnam among ASEAN's top three and the world's top 60 in terms of the business environment, according to the World Bank classification. These concerted efforts underscore Vietnam's unwavering commitment to attracting foreign investments and fostering a thriving business environment.
Recommendations for Attracting More FDI to Vietnam
Certainly, attracting more FDI to Vietnam demands a multifaceted approach. To achieve this, the Vietnamese government must employ several strategies:
Firstly, the government should persist in promoting investments. By actively seeking out and enticing multinational corporations and globally recognized brands to invest in Vietnam, particularly from regions renowned for their technological prowess, capital strength, and managerial acumen, such as the US, the European Union (EU), and Japan, Vietnam can continue to bolster its investment landscape.
Secondly, a selective approach to investment attraction is crucial. FDI must prioritize quality over quantity, with stringent assessments ensuring projects adhere to criteria that drive rapid and sustainable economic development. Vietnam's ongoing efforts to enhance its institutions and policies will enable it to focus on selectively attracting foreign investments, emphasizing quality, efficiency, technology, and environmental sustainability as evaluation benchmarks.
Thirdly, the government should enhance the business investment environment. In addition to ongoing administrative procedure reform and investment environment improvements, Vietnam should cater to the demands of multinational corporations concerning negotiation timelines, agreement signing, and implementation declarations. Prioritizing strategic investors and establishing a global production chain will strengthen the country's appeal to high-tech enterprises and encourage technology transfer to domestic firms.
Fourth, offering investment support incentives is crucial. Vietnam should not only provide a favorable business environment but also introduce compelling support packages. Recent amendments to the Investment Law and related legislation have incorporated competitive incentives, making it more attractive for investors. Establishing mechanisms that support domestic enterprises in collaborating with FDI firms through interest rate subsidies, financial assistance, and access to investment resources will upgrade local supporting industries, allowing them to actively participate in the global supply chain.
By adopting these recommendations, Vietnam can pave the way for more FDI, strengthening its economy and boosting its global standing.
Final Thoughts
In summary, FDI in Vietnam serves as the driving engine behind the nation's economic development. The nation's strategic approach to attracting foreign direct investment has borne remarkable results, evident in the substantial increase in registered and realized capital. With the potent combination of favorable policies, a diverse range of sectors, and strategic initiatives, Vietnam has become a magnet for foreign investment. As the country charts its course for the future, the potential for attracting even more foreign direct investment is substantial. To embark on this journey of growth and opportunity, we invite you to explore Viettonkin, where our expertise in facilitating FDI in Vietnam can be your guiding light. Together, we can shape a brighter and more prosperous future.
The emergence of the Global Minimum Tax (GMT) has triggered a significant paradigm shift in the realm of international taxation, particularly affecting Foreign Direct Investment (FDI) in Vietnam. Understanding the implications of GMT is crucial in navigating the evolving landscape of taxation. With its profound impact on various aspects of the global economy, GMT's significance in the context of Vietnam's taxationlandscape cannot be overstated. This introduction sets the stage for a comprehensive exploration of the intricate effects and implications of GMT on foreign investment in Vietnam.
The Effects of GMT on FDI in Vietnam
GMT's Impact on Vietnam: Reshaping Taxation and Foreign Investment
The introduction of the global minimum tax (GMT), also known as the Pillar 2 solution, carries significant implications for Vietnam's tax landscape. In December, the European Union officially ratified a directive, stipulating that companies must adhere to a minimum tax rate of 15% starting in 2024. Countries with substantial foreign investments in Vietnam, such as South Korea and Japan, are set to implement new tax policies or announce draft tax reforms, marking a shift towards GMT for the fiscal year 2024.
In Vietnam, the state budget revenue from Corporate Income Tax (CIT) in the years 2020-2022 ranged from 18% to 21%. Foreign Direct Investment (FDI) enterprises contributed between 7.5% and 8.5% of this revenue. If the global minimum tax is not applied, Vietnam may introduce top-up CIT for FDI enterprises currently enjoying lower tax rates, thus bolstering state budget revenue. However, if GMT is applied, revenue eligible for tax incentives will be redirected to the budgets of more developed nations. Furthermore, when GMT is applied to local enterprises engaged in offshore investment with subsidiaries in other countries and paying CIT below the minimum threshold, Vietnam can collect top-up CIT, thereby augmenting state budget revenues.
Vietnam's alluring corporate income tax incentives have been pivotal in attracting FDI, with around 335 projects in the processing and manufacturing industries enjoying tax rates below 15%. These projects collectively represent 30% of the total FDI inflow, estimated at $131.3 billion. The country houses 619 multinational enterprises (MNEs) with 1,017 subsidiaries that reported consolidated revenue exceeding 750 million euros in 2021. As of 2024, if GMT comes into effect, 112 MNEs in Vietnam will be directly affected, with South Korea and Japan collectively collecting over $462.5 million in additional taxes.
As of March 20, data provided by the Ministry of Planning and Investment reveals that Vietnam currently has 1,625 offshore investment projects, among which 141 state-invested enterprises constitute a significant portion, accounting for 53.3% of the nation's total investment. The application of GMT could lead to additional tax obligations for local enterprises involved in offshore investments.
The introduction of GMT carries significant implications for Vietnam's tax landscape. Source: vietnamnet.vn
GMT Impact on Tax Incentives and Strategies for Attracting FDI
First and foremost, the adoption of GMT measures is set to nullify the very tax incentives that have consistently piqued the interest of significant foreign investors. Presently, numerous corporations in Vietnam benefit from tax incentives ranging from 2.75 to 5.95 percent, considerably lower than the stipulated 15 percent tax rate. The looming application of GMT in 2024 will necessitate tax rate adjustments for at least 1,015 Foreign Direct Investment enterprises operating within Vietnam.
Discussion surrounding the global minimum corporate tax reveals the potential adverse impacts on multinational companies, including those actively investing in Vietnam. In response to this impending change, experts suggest that Vietnam should formulate an investment policy geared towards attracting strategic foreign investors.
To mitigate the implications of global minimum tax (GMT) on foreign enterprises, Vietnamese tax officials are actively exploring tailored support mechanisms. The General Department of Taxation (GDT) under the Ministry of Finance is engaged in discussions concerning resources that can be allocated to assist Foreign Invested Enterprises (FIEs) impacted by the impending GMT regulation, slated for implementation in early 2024. Vietnam's extensive list of foreign partners, hailing from 142 countries and territories, with a significant concentration in East Asia, underscores the importance of these support measures. The forthcoming support is designed to align with each enterprise's unique characteristics, helping them compensate for the tax incentives affected by the GMT regulation. Enterprises will have access to this support mechanism through registration procedures, following the fulfillment of their tax obligations. Proactively participating in the GMT implementation process is crucial for Vietnam's international integration efforts, tax system reforms, and overall economic and social development.
The application of GMT in 2024 will necessitate tax rate adjustments for at least 1,015 FDI enterprises in Vietnam. Source: vneconomy.vn
Implications of GMT from the Tax Administration Perspective
Implications of GMT under Tax Administration
The implementation of GMT has far-reaching implications for tax administration in Vietnam, including:
Impact on Revenue: GMT introduces a minimum global tax rate that corporations must adhere to. This adjustment can positively impact Vietnam's tax revenue as companies may find themselves paying higher taxes, thereby bolstering the state budget.
Changes in Taxation: Tax authorities in Vietnam are tasked with adapting to the new tax regulations, aligning them with global standards, and ensuring that multinational enterprises (MNEs) comply with GMT rules. This adjustment may necessitate changes in tax codes and policies to maintain conformity with evolving international tax standards.
Monitoring Foreign-Invested Enterprises: Vietnam's tax administration will need to intensify monitoring of foreign-invested enterprises (FIEs) to assess their tax liabilities under the GMT framework. FIEs, which often benefit from various tax incentives, may experience changes in their tax obligations, necessitating a reassessment.
Policy Reforms: The introduction of GMT in Vietnam is poised to expedite policy reforms and intensify the country's international integration efforts. Tax administration plays a pivotal role in implementing and enforcing these reforms to ensure effective compliance with global standards.
In summary, the implications of GMT under tax administration in Vietnam encompass changes in revenue, adaptations in taxation policies, heightened monitoring of FIEs, and the imperative need for policy reforms to harmonize with evolving global tax standards.
The implementation of GMT has far-reaching implications for tax administration in Vietnam. Source: vietnamplus.vn
Recommendations for Foreign Investors in Vietnam
As foreign investors navigate the evolving tax landscape shaped by GMT, several strategic considerations come to the forefront:
Policy Follow-Up and Advocacy: Foreign investors should closely follow the development of GMT regulations and advocate for policies that align with their business objectives. Staying informed and actively participating in policy discussions can help businesses adapt effectively.
Proactive Impact Assessment: Each business needs to proactively assess the impact of GMT, particularly at the group level, to prepare for impending policy changes. Understanding how GMT affects their tax obligations and operations is instrumental in developing strategies to manage this new tax era effectively.
Final Thoughts
In summary, the advent of Global Minimum Tax (GMT) heralds a transformative era in international taxation and its far-reaching effects on foreign direct investment (FDI) in Vietnam. This new global tax landscape carries implications for both local and foreign companies, from revenue changes to policy reforms. Navigating this shift in tax rates and administration is complex, making expert guidance and compliance support vital. Viettonkin is your partner in successfully managing taxation and compliance matters in the GMT era, ensuring that your foreign investment ventures in Vietnam thrive.
Foreign investment in Vietnam has reached unprecedented levels, making it a red-hot destination for global investors. This Southeast Asian gem boasts a thriving investment climate, driven by robust FDI statistics and a strategic position for investing. With the government's investor-friendly policies and a booming economy, FDI in Vietnam is surging, creating significant opportunities for those seeking to capitalize on the country's growth story. In this article, we'll explore the factors underpinning the foreign investment boom and delve into the statistics, industries, and incentives that are attracting investment to Vietnam. Join us as we unravel the reasons behind this surge and why investing in Vietnam is becoming increasingly attractive for global players.
The Surge in Foreign Investment
Surging Foreign Direct Investment (FDI)
Foreign investment in Vietnam has experienced an extraordinary surge in recent years, firmly establishing the country as a magnet for global capital. The statistics tell a compelling story: In the first nine months of 2023, FDI in Vietnam reached an impressive $20.21 billion, reflecting a remarkable 7.7% increase compared to the same period in the previous year. This surge is not an isolated event; it's part of a broader trend of increasing investor confidence in Vietnam.
Notably, the records for foreign investment have been consistently broken in Vietnam. In 2022, the country achieved an all-time high in terms of FDI disbursement, eclipsing the previous record by a substantial margin. This attests to the mounting confidence international investors place in Vietnam's economic potential.
Diverse Industry Involvement in Foreign Investment
The surge in foreign investment is distributed across various industries and sectors. Processing and manufacturing, in particular, has emerged as a magnet for foreign capital. For instance, as of September 20, 2023 this sector saw a 15.5% increase in foreign investment year-on-year. Additionally, real estate, banking and finance, wholesale and retail have all experienced substantial inflows, contributing significantly to Vietnam's economic growth.
Processing and manufacturing has emerged as a magnet for foreign capital. Source: tapchicongsan.org.vn
Global Investors' Foothold in Vietnam
It's important to note that these investments originate from a range of countries, including but not limited to Singapore, Japan, South Korea, China, and the United States. For example, Singapore-based companies have poured substantial investments into Vietnamese manufacturing facilities, while Japanese firms have shown great interest in research and development centers, highlighting Vietnam's appeal as a technology hub.
To illustrate the tangible impact of this surge in foreign investment, consider the case of the Samsung Electronics Complex in Thai Nguyen province. This mammoth project, with an impressive investment of $7.5 billion, has become a symbol of Vietnam's attractiveness to investors. It's not only a substantial source of employment, providing jobs to over 38,500 workers, but also a crucial contributor to Vietnam's export growth.
Factors Driving Foreign Investment Growth
Proactive Government Policies
The remarkable surge in foreign investment in Vietnam can be attributed to a confluence of factors that make the country a magnet for global investors. One key driver is the Vietnamese government's proactive stance in facilitating foreign investment. Over the years, Vietnam has consistently improved its business environment through a series of legislative and policy reforms. These efforts have simplified administrative procedures, reduced bureaucracy, and enhanced transparency, providing a friendlier ecosystem for investors.
Government initiatives such as key economic zones (KEZs) have also played a pivotal role. These designated zones offer tax incentives, streamlined regulatory processes, and superior infrastructure, luring foreign investors seeking favorable conditions for their businesses.
Strategic Location and Gateway to ASEAN
Vietnam's strategic location in Southeast Asia further bolsters its appeal. Situated at the crossroads of key trade routes, the country serves as a gateway to the ASEAN market of over 600 million consumers. This strategic advantage has made Vietnam a preferred destination for companies looking to establish regional hubs, access regional markets, and participate in global value chains.
Skilled Workforce and Vocational Training
Vietnam's abundant, skilled labor force is another significant factor. The country boasts a youthful and tech-savvy population, making it an ideal destination for companies seeking a well-educated workforce. Moreover, the government has continually invested in vocational training programs to ensure a steady supply of skilled workers.
Robust Infrastructure and Efficient Supply Chains
The robust infrastructure in Vietnam, including modern ports, highways, and logistics facilities, has been a critical driver of investment. This infrastructure supports efficient supply chain management and reduces operational costs for businesses, further enhancing the country's attractiveness.
The robust infrastructure in Vietnam has been a critical driver of investment. Source: baochinhphu.vn
Global Economic Trends and Supply Chain Diversification
Global economic trends have played a role in the surge of foreign investment in Vietnam. The reconfiguration of supply chains due to factors like the US-China trade tensions and the COVID-19 pandemic has prompted companies to diversify their production bases. Vietnam, with its stable political climate and growth prospects, has emerged as a preferred alternative for many companies.
The Impact of Foreign Investment on Vietnam's Economy
Robust GDP Growth and Economic Resilience
The surge in foreign investment in Vietnam has left an indelible mark on the country's economy. A primary indicator of this impact is the robust growth in Vietnam's GDP. The influx of foreign capital, coupled with an expansion of industries, has contributed significantly to Vietnam's economic development. In recent years, Vietnam has consistently maintained impressive GDP growth rates, making it one of the fastest-growing economies in Southeast Asia. According to a report by the Singapore-based United Overseas Bank (UOB), Vietnam's GDP growth rate is anticipated to reach 6.6% in 2023, and it is expected to remain above 6% in the coming years, largely driven by foreign investment.
Diversification of Investment across Industries
One notable effect of increased foreign investment is the diversification of industries and regions that benefit from it. Traditionally, foreign investment was concentrated in processing and manufacturing and export-oriented sectors. However, as Vietnam's economy matures, investors are now exploring a broader range of industries. This diversification has led to increased economic resilience, as the country is less dependent on a single sector. For instance, the service sector has seen a significant uptick in foreign investment, with the retail and e-commerce industries witnessing substantial growth.
Foreign-invested enterprises (FIEs) have made significant contributions to Vietnam's export landscape, utilizing the country's favorable conditions to excel on the global stage. Take the case of Nestlé, the Swiss multinational food and beverage company, which expanded its operations in Vietnam. By establishing production facilities in the country, Nestlé not only met the surging demand for its renowned products but also bolstered Vietnam's reputation as an export hub for top-quality food and beverages. This strategic investment has substantially added to Vietnam's export earnings and highlighted its capacity to serve as a trusted and efficient source for consumer goods.
Embracing Sustainable and Responsible Investment
The surge in foreign investment is aligned with the principles of sustainable development and environmental, social, and governance (ESG) criteria. Foreign investors are increasingly mindful of ESG factors, and they are integrating sustainable practices into their operations in Vietnam. The LEGO factory in Vietnam, for instance, is committed to sustainability by using renewable energy sources and implementing waste reduction initiatives. This not only benefits the environment but also aligns with Vietnam's goals for a greener future.
Beyond short-term gains, the surge in foreign investment is expected to bring long-term economic benefits and sustainability. As the business environment in Vietnam continues to improve and investors expand their presence, the country is likely to witness further economic transformation. This includes the transfer of technology, knowledge, and expertise to the local workforce, which can enhance productivity and competitiveness while promoting sustainable development.
Foreign investors are increasingly mindful of ESG factors, and they are integrating sustainable practices into their operations in Vietnam. Source: Lego
The remarkable surge in foreign investment in Vietnam signifies the nation's position as a highly attractive destination for global investors. Foreign direct investment (FDI) in Vietnam has reached unprecedented levels, propelling economic growth and development. Our exploration of investing in Vietnam has revealed that factors such as strategic location, government initiatives, and a skilled workforce have fueled this investment boom. As we've seen through examples, Vietnam's allure as an investment hub is evident. With a strong commitment to sustainable development, Vietnam's partnership with foreign investors is poised to foster long-term economic prosperity. For expert guidance and support in seizing the wealth of investment opportunities in Vietnam, look no further than Viettonkin. Connect with us today to embark on your investment journey in Vietnam.
Located in the heart of South East Asia and along the coastline of the Pacific Ocean, Vietnam has been a rising star for FDI opportunities. With its rapid economic growth and comparative advantages of providing incentive policies to improve the investment climate, it is optimistic that there will be a huge shift of big and small foreign investors to Vietnam for the year ahead. In this article, we’re going to show an outlook of business opportunities in Vietnam and the country’s prospects for FDI in 2021.
Opportunities for Vietnam FDI in 2021
The wave of investing in Vietnam is likely to continue into 2021 when recent years witnessed a significant number of FDI projects under trade agreements Vietnam has signed. However, it is important to note that there will be changes in the structure and investment patterns. Some factors that could contribute to the changes are the growth of consumer-facing FDI, Vietnam’s digital economy, and agreements with nations beyond Asia.
The growth outlook for consumer spending could impact foreign investors in the consumer-facing sector. Consumer-facing FDIs inflow is also dependent on the return of Vietnam's mobility and consumer behaviour changes to digital products. Along with this, the rapid expansion of Vietnam’s digital business landscape could affect consumption trends.
While the consumer remains a driver of FDI, the routes foreign firms need to take when doing business in Vietnam is likely to change. With the boom of smartphones, the internet, and social networks, Vietnam’s digital economy is akin to “a dragon being unleashed” with great potential. According to the e-Conomy SEA 2019 report by Google, Temasek and Bain & Company, the country's digital economy is expected to top US$52 billion in value by 2025. Investors could consider pouring money into the sub-sectors of the digital economy that represent nascent and high-growth areas of consumer demand such as e-commerce, digital banking, and online gaming.
As investors could expect further improvements in doing business in Vietnam, the trade intensity of FDI is likely to expand. On top of the positive economic benefits of the high-quality processing and cost competitiveness, Vietnam’s export and import industries both in the goods and services sectors are lucrative targets that no foreign investors want to overlook. Additionally, Vietnam has used its participation in free trade agreements with countries beyond Asia as an instrument to encourage a new range of FID in terms of geography and sectors. For example, EuroCham’s report revealed that 72 per cent of members believed that the number of European firms investing in Vietnam will increase thanks to the effect of EVFTA.
Opportunities for Vietnam FDI in 2021
Key fields and provinces to invest in Vietnam
Attracting foreign direct investment has always been a focus of Vietnam’s external economic affairs. As a part of the process, the Ministry of Planning and Investment suggest investors who want to set up a company in Vietnam pay attention to key industries. The prioritized manufacturing sectors include electronics and components manufacturing; supporting industries in these industries; pharmaceutical manufacturing; medical equipment; digital technology, digital banking; processing industries (for agriculture products) and automobiles. Furthermore, heavy industries including steel, oil and gas; renewable energy, electrochemical oil, and LNG are other key contributors to the nation’s export share. In addition to the existing business opportunities in Vietnam, the government is working hard to boost the innovative ecosystem. At the Vietnam venture submit conference, US$800 Million pledged to support startups and projects with innovative ideas.
There are four key economic regions in Vietnam. In which, the Southeast Delta and the Red River Delta cover the majority of economic and investment hubs in the country. Investors who are interested in the Red River Delta should probably consider Hanoi, Bac Ninh, Hai Phong, Hai Duong, Bac Giang, Hung Yen, Vinh Phuc, Ha Nam. Otherwise, some localities have advantages of good infrastructure conditions, favourable locations in south-east Vietnam are HCM City, Dong Nai, Binh Duong, Vung Tau, Da Nang, and Quang Nam.
Given the attractiveness of investor-friendly regulations, stable socio-political environment, cost-competitive labour force, and consumer demand prospects, FDI opportunities in Vietnam in 2021 and in the forthcoming years look promising. Therefore, it is confident that Vietnam will remain an appealing hub of investment in ASEAN.
If you are a foreign investor and businessman who seek investment opportunities in Vietnam, please contact Viettonkin consultant team via email or contact page to get support. With our specialized knowledge and experience in helping foreign enterprises’ getting into the Vietnamese business environment fruitfully and economically, we can provide detailed advice on procedures, stages, and documents required to prepare for the application of a Vietnam business registration certificate.
Vietnam’s market is growing quickly and will see the biggest growth in the future. The foreign investors have been attracted to the market and have set up companies within Vietnam. Thus, it is important to gain a strong understanding of the country’s export regulations and procedures. Plus, the country has a lot of young population who are always hungry for foreign products, along with digitalization that has resulted in exporting opportunities for foreign companies. If you want to know more, you should read this article until its end, because it will provide you with in-depth information about exporting in Vietnam.
Vietnam does not require a company to have an export license to set up a trading company which resell imported and exported goods there. However, a foreign investor has to register with the Department of Planning and Investment (DPI) to conduct export business.
In addition, foreign investors who wish to engage in export activities in Vietnam are required to obtain an Investment Certificate. The companies that wish to expand their current business operations to engage in export activities must follow the procedures for adjusting their Investment Certificates.
According to Circular 34/2013/TT-BCT, there are certain goods that foreign companies are not allowed to export from Vietnam. Goods banned for export include petroleum oil, and they cannot import cigars, tobacco, petroleum oils, newspapers and journals, and aircraft as well.
Certain goods require the company to obtain export permits from the government, as per Appendix II of Decree 187/2013/ND-CP. These are:
Goods subject to export control in accordance with international treaties to which Vietnam is a contracting party.
Goods exported within quotas set by foreign countries.
Chemicals, explosive pre-substances and industrial explosives.
Furthermore, all exports have to comply with the government regulations on quarantine, food safety, and quality standards. They also have to be inspected by the government agencies before clearing customs.
Duties Applied to Export
Most exported goods across the borders of Vietnam, or pass between the domestic market and a non-tariff zone, are subject to export duties. However, there is an exception, if it is goods in transit and goods exported abroad from a non-tariff zone, and goods passing from one non-tariff zone to another.
Moreover, most goods and services being exported are exempt from tax. Export duties which are ranging from 0% to 45% and computed on free-on-board (FOB) price are only charged on a few items. The goods are mainly natural resources, such as minerals, forest products, and scrap metal. There are items which are not produced domestically can enjoy lower rates of import duties, or even a 0% tax rate. These consumer goods are machinery, equipment, materials and supplies.
Nonetheless, export duties are needed upon registration of customs declarations with the customs offices. Export duties have to be paid within 30 days of registration of customs declarations.
Vietnam also appoints several different types of duties on the import and export of goods. If you wish to find more information on a range of goods, you can visit the website of Vietnam Customs.
Trade Fairs for Exporters
As we know, Vietnam is now one of the fastest-growing countries in the world, and selling the products in an Asian market can be challenging. Therefore, you must build up local networking and get familiar with the market. You can also analyze the market trends and have a deep understanding about the competition for your successful business.
There is a great way of expanding the connection and network by visiting these local trade fairs. Here are the lists:
It focuses on food products and is one of the biggest in Vietnam. The exhibition attracts more than 300 exhibitors from 19 countries worldwide, also covering more than 10.000 square meters.
It is held in the Saigon Exhibition & Convention Center (SECC), the biggest modern Exhibition & Convention Center in the South of Vietnam. This exhibition covers the product categories, such as, fruit and vegetables, seafood, drinks, tea and coffee, food ingredients, fine food, and food technology.
2. Vietnam international Trade Fair
It is one of the biggest fairs held in Ho Chi Minh City in December each year. There are 1.000 booths and an area covering 15.000 square meters. The event attracts the exhibitors from countries, such as, India, Taiwan, Korea, Hong Kong, Indonesia, Russia, The United States (US), China, Spain, Italy, and Germany.
Almost 1.000 companies from 20 countries displayed the common products at the event, including electrical appliances, cosmetics, processed food, drinks, kitchen appliances, beauty and health care.
Export Shipping To Vietnam
After visiting these fairs, you may ask yourself how you ship the products to Vietnam. Here are 2 options that you need to keep them in your mind:
1. Direct Shipping
It can be used if the country of manufacture is close to Vietnam, like China or Korea. You can also offer short shipping times and low logistics costs.
On the other hand, if you sell from Europe or the US, you should look into a more long-term solution.
According to Vietaircargo, air freight takes around 8-10 days from the US to Vietnam, including the time of transportation from the place of purchase to the place of receipt. Airfreight is generally expensive over long distances, for instance:
1 lbs (0.45 kg): USD 14.99
2 lbs (0.9 kg): USD 28.99
3 lbs (1.35): USD 40.99
2. Order Fulfillment
The demand for short shipping times and swift returns, plenty of third-party logistics companies have appeared both locally in Vietnam and overseas.
One of the biggest e-Commerce, Lazada, encourages its sellers to use Fulfillment-By-Lazada (FBL), which is managed by Timeslogistics in Hong Kong.
There are advantages of using a fulfillment center in Vietnam, such as, costs are around one-third compared to China, but the costs in China are still 50% lower, compared to Hong Kong.
In addition, the delivery times from Vietnam into other Southeast Asia countries are generally shorter.
In conclusion, these are all about exporting products to Vietnam. You must pay attention to the regulations and procedures, thus you will not be facing the difficulties in the future. Additionally, you have to know the local market, be active at local trade fairs, and to calculate the shipping costs, so your business can get more benefits as the time passes by.
Over the recent years, Vietnamese businesses and entrepreneurs have continuously grown and prospered, and also significantly contributing to the country’s economic development. Furthermore, Vietnam has also become an attractive destination for ASEAN investors, and any other investors like from the United States and Europe. Therefore, many investors want to establish a company, a branch, a representative office, or set up joint ventures to understand the local market. This article will provide you with Vietnamese entrepreneurs, finding local partners, as well as to choose best joint ventures partners in Vietnam!
Vietnamese entrepreneurs somehow face numerous difficulties in a context of deep international economic integration. They have been encouraged to be proactively developing strategies to gradually become a capable and qualified force that plays a key role in economic development. It is as well as enhancing the capability for international economic integration.
The Party and State have made numerous policies and guidelines to encourage the development of enterprises as well as promote the role of entrepreneurs in the cause of national construction and defence. Today, Vietnam has over 800.000 enterprises and around 5.2 million business households with over 5 million entrepreneurs.
However, it has proved that the pavement of the way for enterprises' development was in the right direction. Many Vietnamese entrepreneurs have been listed among the top global “US$ billionaires.” Those entrepreneurs have big dreams and ambitions with aspirations of contributing to make the country more powerful, prosperous and civilised.
These rapid increases in the number and scale of enterprises across all economic sectors, the Vietnamese entrepreneurial force has continuously developed, significantly contributing to the implementation of socio-economic development strategies, creation of jobs for employees, and the settlement of social welfare issues.
Another fact to add, businesses have contributed over 60% to the country’s GDP, around 70% of state budget revenue and has attracted millions of employees. Thus, the promotion of the country’s economic development could be considered a mission and responsibility of the entrepreneurial business community.
Additionally, some companies are enjoying stable earnings brought by joint ventures they established with foreign partners, but their core businesses remain insignificant. Plus, these joint ventures are usually foreign direct investment (FDI) projects in which State-owned enterprises contribute capital and land use rights, while foreign companies contribute money and technology.
Joint ventures indeed can be a great way to make money, but in order to do this, you must know how to find the right local partners that will provide what you need. Let’s keep reading!
Finding The Local Partners for Joint Ventures
Finding local partners for joint ventures is not as difficult as you think, it is relatively easy. Nevertheless, you have to utilize tools or sharpen your skills to get more local partners for your significant business development. Thus, there are ways to find the rightest local partners for you.
1. Social Media Usage
Setting up a blog and sharing what you are doing through social media is remarkably simple. The websites like WordPress and Squarespace let you set up a website in minutes. In addition, Twitter, LinkedIn, Google+ and Facebook can help you build and find communities that may be interested in what you want to achieve. You only need to be confident to put it out there and communicate clearly about your doing, because people are watching and you never know where a potential partner will come from.
2. Communicating Your Intentions
The first step in spreading the words of your works is to be clear about your vision, strategy, and types of project that you want to do. If you desire of more additional partners, you can do this following actions:
Asking your inner circle to recommend your idea to their friends or family members.
Posting your idea on a discussion forum and seeing who responds.
Posting your ideas on LinkedIn groups that have formed around your business.
3. Evaluate Your Joint Venture Partners
Developing a thorough way of screening potential partners is tough, but you must do it if you want to have the right partners. You can consider this following criterias to make the right partners:
Different operational skills: find someone whose skills complement rather than replicate yours.
Similar work habits: you have a shared view as to how much you will work to achieve your goals.
Emotional buoyancy: you need the capacity to support each other during the highs and lows of the project.
Total honesty: you and your partners must be committed to telling each other the truth all time.
Choosing The Best Joint Ventures for Your Business
Determine the ideal business partner in a joint venture is one that has resources, skills and assets that fulfill your own. The joint venture has to work contractually, but there should also be a good fit between the culture of the two organizations.
There is a good starting place to assess the suitability of existing customers and suppliers that you already have a long-term relationship with. Additionally, you can think of your competitors or any other professional associates.
There are things you need to consider when assessing the suitability of partners, and these are:
How well do they perform?
What is their attitude to collaborate and do they share your level of commitment?
Do you share the same business objectives?
Can you trust them?
Do their brand values complement yours?
What kind of reputation do they have?
You also must carry out some basic due diligence checks when looking at new potential partners. Firstly, examine their legal status, then make sure that they have the right to enter the joint venture. You should ask yourself these things:
Are they financially secure?
Do they have any credit problems?
Do they own assets that they will be putting into the joint venture?
Do they already have joint venture partnerships with other businesses?
What kind of management team do they have in place?
How are they performing in terms of production, marketing and workforce?
What do their customers and suppliers say about their trustworthiness and reputation?
Before considering joint ventures, you probably need to pay attention to these things that are explained above. Having a knowledge of local partners, finding the local partners, then finally choosing the best joint ventures for your business are rather difficult, especially when you do not plan them out.
In conclusion, if you are still unsure about finding the local partners or what the best joint ventures that you are interested in, you can ask us for our help! Viettonkin is here to assist you and your business anytime.
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, it depends on the field and also needs to be carefully selected. In this article we will provide you with a condensed brief about FDI opportunities in Vietnam post-Covid 19.
Between 2010 and 2019 a total of 21732 FDI projects were recorded. These projects represent a total capital investment of USD 143,327 million, which is an average investment of USD 6.6 million per project.
Vietnam is becoming an attractive FDI investment with an increasing number of projects and capital. The largest number of projects was announced in 2019, with 4,028 projects that year. Average project size peaked in 2019 for both registered capital and implementation capital. However, there was a trend in the number of smaller deals (mainly < USD 6 million).
Due to the impact of the COVID-19 epidemic, the global inflows of FDI are expected to decline by 40% in 2020. Foreign investment into other countries in the world plummets. However, Vietnam's attraction of foreign investment in the first 11 months of 2020 is still relatively positive, reaching $ 26.4 billion (down 16.9% over the same period in 2019). The realized capital was 17.2 billion USD, only down by 2.4% YoY. The world and regional countries declined stronger than Vietnam. In which, Singapore is the largest investor with 8.07 billion USD, followed by Korea, China, and Japan.
The newly registered capital decreased slightly by 7.6% over the same period, while the additional capital was 6.3 billion USD, still up 7.8%. These are positive signals, enterprises investing in Vietnam immediately disburse, expressing foreign investors' confidence in Vietnam's investment environment (political, economical and social stability, and containing the COVID-19 well).
Top sectors of Vietnam FDI inflow
Manufacturing and processing
Despite the effects of COVID-19 that caused FDI flows to decline by 30-40%, calculated by UNCTAD, FDI was 75% over the same period. This is better than many other countries and this shows the attractiveness of Vietnam market in the eyes of international investors.
Therefore, investors still see many business opportunities in Vietnam thanks to the following three factors:
- The disbursed capital decreased (decreased by 2%), but the decrease rate was improving.
- Adjusted capital increased by 10.6% over the same period, reaching $ 6.4 billion.
- The number of new projects, capital adjustment and the number of capital contribution and share purchases by foreign investors have decreased, but the level has gradually decreased.
Currently, foreign investors are still interested, trust and have investment needs, but due to the COVID influence, the travel of new investors and the expansion of foreign investment projects continue to be affected.
Vietnam is emerging as one of the top manufacturing destinations in Southeast Asia.
Ranked 33rd in the top 100 most valuable national brands in the world, up 9 times compared to 2019.
Nearly 300 enterprises from countries around the world have plans to expand investment. Most of those make new FDI inflow or are researching and seeking for investment in Vietnam. In which, there are more than 60 corporations and enterprises that have had initial steps in implementing new investment and expanding investment in Vietnam.
Finance - Banking
Nearly a year ago, the merger and acquisition market (M&A) of the finance and banking industry set a new record when a strategic investment deal appeared with a value of nearly 20,300 billion VND, equivalent to 875 million USD. Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV) privately issued 603.3 million shares to strategic shareholder KEB Hana Bank (Korea) at the offering price of 33,640 dong / share.
In fact, half a year later, on the eve of the General Meeting of Shareholders in June 2020, Aozora Bank increased its ownership ratio of Orient Commercial Joint Stock Bank (OCB) to 15%, equivalent to holding more than 131, 5 million shares.
In 2020, some more banks have shared their plans to find foreign strategic shareholders. Nam A Bank's plan to raise capital from VND 5,000 billion to VND 7,000 billion approved at this year's Annual General Meeting of Shareholders. This is expected to attract more capital from foreign investors.
Meanwhile, Saigon Commercial Joint Stock Bank (SCB) also plans to issue 500 million shares. According to the bank's leader, SCB is in the process of negotiating with strategic partners to mobilize foreign capital.
On the stock market, banking stocks were among the fastest recovering groups after the March 2020 sell-off. This partly reflected the certain interest of financial investors in this sector. As for the investors in the industry, the banking sector of Vietnam is also more attractive in the current period in the case of Vietnam becoming a remarkable destination in the trend of capital movement.
In addition, with the Vietnam-EU Free Trade Agreement (EVFTA) coming into effect in early August 2020, a special provision has allowed European banks to raise the ceiling on investor ownership limits. Foreign investment from 30% to 49% for 2 Vietnamese banks, except for the group of 4 joint stock commercial banks where the State is holding a controlling share.
Real estate
From June 2019 to September 2020, the real estate sector accounts for nearly 40% of the M&A market in Vietnam, according to MAF Research.
In the context of increasingly tight land funds, the goal of owning a land fund for a long-term strategy through the form of M&A is the preferred solution by real estate businesses with financial potential. Therefore, the real estate M&A market prospect is forecasted positively in the coming time, because Vietnam is considered to be the least affected among Southeast Asian countries.
The opportunity that Covid-19 brings to businesses with available financial resources and good governance capacity is not small, because they are facing the opportunity to buy other businesses at cheaper prices.
The $ 50 million deal between Danh Khoi Holdings and Sun Frontier is the latest M&A deal in the real estate industry recently recorded. According to the Vietnam M&A Forum Research Group (MAF Research), Danh Khoi Holdings acquired 100% of Sun Frontier shares (belonging to a famous Japanese real estate group - Sun Frontier Fudousan).
In addition to Danh Khoi Holdings' acquisition of Sun Frontier Vietnam, the deal that Pacific Star Investment and Development Joint Stock Company spent 42 million USD to buy shares in Vinaconex - An Khanh is also a remarkable move, according to MAF Research .
Specifically, Vinaconex has transferred the entire 50% stake in An Khanh New Urban Development Joint Venture Company Limited (An Khanh JVC), the investor of the Splendora An Khanh Project, to Pacific Investment and Development Company. Star.
Compared to Ho Chi Minh City, the M&A deals in Hanoi are smaller in scale, but also quite active. For example, the deal that Pacific Star Investment and Development Joint Stock Company spent $ 42 million to buy back the entire 50% stake of Vinaconex in An Khanh New Urban Development Joint Venture Company (An Khanh JVC), the investor project Splendora An Khanh.
In addition to domestic investors, M&A activities also have the participation of many foreign investors such as Mitsubishi Group and Nomura Real Estate Co., Ltd. of Japan, who bought 80% of the shares in phase 2 of the Grand project. Park, District 9, HCMC. According to the plan, the whole project will be completed and completed and handed over in 2023.
Limited potential investors tend to cooperate with real estate companies, investment funds with large financial resources to sell part or all of the Project and this creates a huge demand for M&A.
Industrial real estate developers are pushing investments in Vietnam*
In the next 5-10 years, there are 3 investment trends in industrial real estate:
Existing investor trend to expand production facilities, expand initiators, associate investment and bring factories in Vietnam to participate in the global supply chain.
Investment shifting trend "China + 1" or shifting investment from some countries to patients taking advantage of the advantages of safe destinations, skilled workers.
Real estate investors boosted investment in Vietnam under two forms: direct investment in joint venture to expand factories, investment in infrastructure systems. The second form is M&A in the field of industrial BDS, acquisition of strategically located land, industrial zones to form investment, and convert functions. -> This is a strong emerging wave in the coming time.
*Source: Viettonkin research team
Retail
The Ministry of Industry and Trade said that in 2010, the total average retail sales of consumer goods and services per capita nationwide was only 19.3 million VND / person, by 2019 it was 51.2 million VND. / person, contributing approximately 8% to the gross domestic product (GDP).
Therefore, the modern retail market in Vietnam has great potential for development due to its large population size, young population structure and average increase in household spending by 10.5% per year …
A recent report by a number of market research companies shows that Vietnam's retail industry recently opened its doors to the appearance of some popular retail brands from abroad with many chain stores like Uniqlo., GG25 ...
According to experts, Vietnam also has a stable political system, is on the rise and integrates with high economic openness and disease control, so it is considered as a bright spot for investment in ASEAN and Europe Asia is also an attractive destination for investment market shifts.
Therefore, to analysts, Vietnam is holding "golden opportunities" to prepare to wait for the wave of FDI and retail investment to be no exception before the coming investment wave.
With the forecast to be the most exciting market in the world, Vietnam's retail market is attracting a wave of foreign investment (FDI), but also creates many challenges for domestic businesses.
The era of Japanese retailers
The leading Japanese retail group in Japan - AEON, on the afternoon of November 2, officially announced its plan to open AEON MALL Hai Phong in mid-December. This is the 6th AEON MALL of AEON in Vietnam. AEON MALL has planned to invest in 20 major shopping malls in Vietnam by 2025.
"We will accelerate the expansion of this AEON MaxValu supermarket chain as soon as possible, with about 100 supermarkets in Hanoi," said Mr. Nakagawa Tetsuyuki. After a period of observing and researching the market, AEON has recognized that the Hanoi market is very potential but there are few modern supermarkets.
Vietnam's retail market, with a size of 100 million people, is considered a lucrative "piece of cake". That is why, as soon as Vietnam opened its retail market, a series of big names in this field landed in Vietnam, from Metro Cash & Carry, to Auchan, then BigC, Lotte …
UNIQLO, another Japanese name, also opened two consecutive stores in Hanoi. So from the beginning of the year until now, regardless of Covid-19, this famous Japanese fashion house has opened 3 stores in Hanoi, and is expected to continue to open more stores in Hanoi and Ho Chi Minh City. HCM within the next 3-5 years.
Meanwhile, in the middle of last October, the first store of the largest Japanese cosmetic and pharmaceutical chain Matsumoto Kiyoshi also opened its doors to welcome customers at Vincom Dong Khoi (HCMC). Matsumoto Kiyoshi Holdings was supposed to open the first store in Vietnam earlier, but it was postponed for 6 months because of Covid-19 translation.
At the end of July, the first experience store in Vietnam of this Japanese retail chain officially opened its doors at Parkson Le Thanh Ton, Ho Chi Minh City. Of course, Muji didn't come to Vietnam just to open a single store.
Expected threats for FDI post Covid-19
Besides the advantages, there are also many difficulties that make investors also have considered when investing in Vietnam, as listed:
Lack of quality human resources.
The decline of foreign capital due to the impact of epidemics causes a lot of difficulties while the demand increases, increasing competition among countries in attracting foreign investment.
Our national conditions are still limited to receive moving capital flows, such as lack of the quality of human resources. We can see that the infrastructure system has not met the requirements; The legal and policy system still has overlaps and shortcomings, causing difficulties in the implementation process.
Administrative procedures in many fields and localities are still cumbersome, causing difficulties and problems, prolonging the time to complete procedures for investors.
The supporting industry has not yet developed, has not yet met the requirements of investors, many supporting products are still imported from abroad, causing difficulties and increasing input costs for production and business activities.
The capacity of domestic enterprises is still very limited. It is difficult to absorb shifted investment capital effectively. The linkage between domestic and foreign businesses is not timely and effective.
The industrial real estate for industrial production as well as available infrastructure to meet the needs of investors has not been promptly met.
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.
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 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,…
Vietnam is emerging as a prime destination for foreign direct investment (FDI), driven by rapid economic growth, favorable government policies, and an investor-friendly business environment. This eBook provides a deep dive into Vietnam’s economic landscape, highlighting key industries such as manufacturing, real estate, and digital banking that attract FDI. It also explores the government’s proactive measures to streamline investment procedures, improve infrastructure, and offer tax incentives for foreign enterprises. Additionally, it covers crucial insights into market entry strategies, regulatory requirements, and socio-cultural factors that influence business success in Vietnam.
Download the eBook now to gain expert insights into successfully navigating Vietnam’s dynamic investment landscape!
Vietnam is emerging as a prime destination for foreign direct investment (FDI), driven by rapid economic growth, favorable government policies, and an investor-friendly business environment. This eBook provides a deep dive into Vietnam’s economic landscape, highlighting key industries such as manufacturing, real estate, and digital banking that attract FDI. It also explores the government’s proactive measures to streamline investment procedures, improve infrastructure, and offer tax incentives for foreign enterprises. Additionally, it covers crucial insights into market entry strategies, regulatory requirements, and socio-cultural factors that influence business success in Vietnam.
Download the eBook now to gain expert insights into successfully navigating Vietnam’s dynamic investment landscape!
Founded in 2009, Viettonkin Consulting is a multi-disciplinary group of consulting firms headquartered in Hanoi, Vietnam with offices in Ho Chi Minh City, Jakarta, Bangkok, Singapore, and Hong Kong and a strong presence through strategic alliances throughout Southeast Asia. Our firm’s guiding mission is aimed towards facilitating intra-ASEAN investments and connecting investors in Southeast Asia with the rest of the world, thus promoting international business relationships and strengthening inter-nation connections.
