Vietnam Remains a Bright Spot for Foreign Investment

Vietnam is increasingly becoming a favored destination for foreign investors, with numerous large-scale foreign investment projects in priority sectors reaching billions of USD. Recent discussions with foreign business leaders and recent data indicate a positive trend in foreign investment in Vietnam, which continues to shine amid the global economic landscape.

Investment Highlights

According to the Foreign Investment Agency (Ministry of Planning and Investment), in the first seven months of 2024, new foreign investment registered in Vietnam reached over USD 18 billion, marking a 10.9% increase compared to the same period last year. New registrations totaled USD 10.76 billion (up 35.6%), while additional investments amounted to nearly USD 4.97 billion (up 19.4%). However, investment through capital contributions and share purchases decreased by 45.2% to USD 2.27 billion.

Despite the decline in investment through capital contributions, both new and additional investments have significantly increased compared to the previous year. Notably, July 2024 saw a continuation of the upward trend in disbursements, with a total of USD 12.55 billion, an 8.4% increase from last year. This growth highlights Vietnam's continued attractiveness as an investment destination even as global investment flows decline.

At a recent economic forum organized by the Vietnam Economic Magazine and the Central Economic Commission, ADB Chief Economist Nguyen Ba Hung discussed the global investment trend, noting a significant reduction in foreign investment in China. He pointed out that these funds are flowing into neighboring countries, with Vietnam standing out as a "bright spot" in the overall decline.

Dominik Meichle, President of the European Chamber of Commerce in Vietnam (Eurocharm), emphasized that the EU-Vietnam Free Trade Agreement (EVFTA) significantly contributes to Vietnam's attractiveness to European businesses. Additionally, Vietnam's young and dynamic workforce, with over 50 million people, and its increasingly important role in the global supply chain further enhance its appeal.

Sectoral Focus

The processing and manufacturing sector remains the most dominant in foreign investment. Of the 1,816 newly registered foreign investment projects totaling USD 10.76 billion, the processing and manufacturing industry accounts for USD 7.88 billion, or 73.2% of the total. Similarly, of the USD 4.97 billion in additional investment, over USD 4.35 billion (87.5%) is concentrated in this sector.

Foreign investments in the processing and manufacturing sector through capital contributions and share purchases amount to over USD 420 million, representing 18.4% of total contributions, second only to real estate.

Promising Projects

Several large-scale projects are in the pipeline. Gauta Adani, Chairman of Adani Group, expressed interest in investing over USD 5 billion in Vietnam during a recent meeting with Prime Minister Pham Minh Chinh. Proposed projects include the Lien Chieu Port in Da Nang and the Vinh Tan 3 Thermal Power Plant. Indian pharmaceutical companies BDR and SMS Pharmaceuticals also plan to invest in a high-tech pharmaceutical industrial park in the Nghi Son Economic Zone.

Japanese firm NIDEC, led by CEO Kitao Yoshihisa, will continue to expand its investment in high-tech sectors in Vietnam, having already invested over USD 1 billion since 2017.

Challenges and Recommendations

Despite the positive outlook, the Business Confidence Index (BCI) for Q2 2024 has slightly decreased from 52.8 points in Q1 2024 to 51.3 points. This suggests the need for ongoing legal and regulatory improvements. Eurocharm recommends five key areas for enhancing Vietnam's business environment: (i) streamlining administrative procedures; (ii) increasing legal clarity; (iii) developing core infrastructure; (iv) simplifying visa and work permit procedures for foreign experts; and (v) ensuring political stability and security.

In summary, Vietnam's strong performance in attracting foreign investment continues, with promising projects and an appealing business environment driving growth despite global challenges.