FDI expected to bounce back with improved investment climate

Illustrative image (Source: VNA)

Vietnam’s continued efforts to improve its business and investment climate is expected to help the country to lure in further foreign direct investment (FDI), which is considered one of the key impetuses for economic growth.

On February 24, the Vinh Phuc Industrial Parks Management Board granted an investment registration certificate to IL San Precision Vina Company from the Republic of Korea to develop a 500,000 USD IL San Vina factory producing electronics products in the northern province’s Binh Xuyen Industrial Park (IP).

Earlier, on February 21, the Vinh Phuc Industrial Parks Management Board also granted a certificate to Italy’s Piaggio Vietnam to increase its investment capital by an additional sum of 75 million USD, raising its total investment capital in the province to 165 million USD.

According to the Vietnamese Ministry of Planning and Investment (MPI), Vinh Phuc is among top destinations of foreign investment in Vietnam.
“Despite difficulties caused by disruptions in supply chains and geopolitical uncertainties, Vietnam remains attractive to foreign investors,” said Do Van Su, vice director of the MPI’s Foreign Investment Agency.

Specifically, in January when the Tet holiday took place and domestic production activities were almost halted, Vietnam reported 153 newly registered projects, worth 1.2 billion USD, representing a 48.5% increase in the number of projects and a 3.1-fold rise in value. This is a sign of the confidence of foreign investors in the investment environment of Vietnam, the FIA said.

Also in January, new capital added to operational projects witnessed a year-on-year drop of 76% to 306.3 million USD, while capital contributions and stake purchases fell 61% year on year to more than 174 million USD, resulting in a 19.8% year on year decrease in the total FDI capital to 1.69 billion USD.

In the period from January to February 20, total newly registered and newly added FDI and capital contributions and stake acquisitions in Vietnam hit 3.1 billion USD, down 38% year on year.

However, the newly registered capital surged 2.8 times year on year to 1.76 billion USD, and capital contributions and stake acquisitions touched 797.9 million USD – up 3.7% year on year. Meanwhile, newly added capital dropped 85.1% year on year to 535.4 million USD.

The MPI reported that as of February 20, accumulated FDI capital in Vietnam hit nearly 442.3 billion USD in over 36,600 valid projects.

According to the ministry, Vietnam expects to lure in as much as 36-38 billion USD worth of FDI this year, up strongly from the figure of nearly 27.72 billion USD recorded last year. FDI will continue acting as one of the key drivers of economic growth.

The MPI is also expecting that FDI disbursement in this year will likely reach as much as 22-23 billion USD, almost the same as 22.4 billion USD last year.

According to MPI, the key factors for FDI to continue increasing this year are the economic growth in 2022 and big efforts of the government, ministries, and localities in ameliorating the domestic business and investment environment, in addition to significant advantages brought by free trade agreements that Vietnam has signed.

One of the positive factors in Vietnam’s FDI landscape this year is that many projects registered last year will come into operation this year, helping create hundreds of thousands of jobs.

Andrew Jeffries, ADB country director for Vietnam, said that there are also many reasons for optimism about Vietnam’s economic prospects in 2023.

“In Vietnam, economic activities recovered faster than expected following the removal of COVID-19 restrictions and the achievement of nationwide vaccine coverage,” Jeffries said. “Despite a volatile stock market last year, FDI has been strong and has even picked up. There is no doubt that Vietnam’s economic prospects for the medium and long term remain very positive.”

“FDI investors think long-term when they make their investments, and we noted that continued strong interest in Vietnam as an FDI destination. That clearly shows a long-term vote of confidence in the country. With sound economic fundamentals and strong leadership, we strongly believe that Vietnam will be able to brace the headwinds in 2023 and beyond,” Jeffries stressed.

MPI Minister Nguyen Chi Dung said that Vietnam has adopted a selective approach to attracting foreign investment inflow which will contribute to the country's implementation of the sustainable development strategy.

Priority will be given to projects using new and green technologies, with high added value, modern corporate governance, and high spill-over effects, ensuring technology transfer, and being integrated with global supply and production chains, Dung said.

A recent survey conducted by the MPI revealed that 76% of enterprises, both domestic and foreign enterprises reported that they are satisfied with the Vietnamese government’s support policies.

They were most satisfied with the VAT waiver and reduction policies, and those aiming to stabilise gasoline prices, improve the work permit issuance process and customs clearance procedures, and support import-export and workers’ livelihoods./.