Rising FDI - Long-term Prospect

9:43:43 AM | 12/21/2021

Despite COVID-19 pandemic impacts, foreign direct investment (FDI) in Vietnam in 2021 may be as much as that of 2020, according to economic experts. In the long term, Vietnam will remain a bright spot on the FDI attraction map. 

An attractive destination for investors

According to the Foreign Investment Agency under the Ministry of Planning and Investment, as of November 20, 2021, FDI funds into Vietnam reached US$26.46 billion, a slight increase of 0.1% over the same period in 2020. Notably, the fund from new projects and existing projects continued to impressively increase from a year earlier.

Specifically, from January to November, 1,577 new projects with nearly US$14.1 billion were licensed, up 3.76% year on year, while 877 existing projects registered to increase their investment fund by over US$8 billion, up 26.7%. Foreign investors invested in 18 industries out of a total of 21 industries. The processing and manufacturing sector led with over US$14 billion, accounting for 53% of the total registered investment capital, followed by the electricity, real estate, wholesale and retail sectors.

The continued growth of FDI funding largely resulted from added investment of existing projects. Typically, LG Display Hai Phong Project (South Korea) increased its investment fund by US$2.15 billion (US$1.4 billion on August 30, 2021 and US$750 million on February 4, 2021). Kraft Vina paper mill with a yearly capacity of 800,000 tons (Japan) had a total investment fund of US$611.4 million, which will manufacture kraft paper, lining paper and packaging paper in Vinh Phuc province (its investment license was granted on July 23, 2021). The factory of Polytex Far Eastern Vietnam (Taiwan) Co., Ltd revised up its investment fund by an additional US$610 million (on May 13, 2021).

Also according to FIA, optimistically, more FDI projects registered with over US$50 million. FDI projects are aiming for higher added value, generating ripple effects and bringing Vietnamese enterprises into supply chains and value chains.

Long-term outlook

With the shift in response to the COVID-19 pandemic, Vietnam's economy will recover strongly and FDI inflows to Vietnam will rebound in the near future. The FDI value in 2021 may be as much as US$28 billion in 2020.

The above assertion is completely grounded when the Government and relevant agencies have promptly stepped in and introduced many solutions and policies to remove difficulties and obstacles for businesses and investors. In particular, Resolution 128/NQ-CP dated October 11, 2021 on temporary regulations on Safely and flexible adaptation and effective control of the COVID-19 pandemic has really removed barriers in the business recovery stage for enterprises.

In the year, many large FDI projects have been invested in Vietnam. SK Group of South Korea decided to pour US$340 million to purchase a 4.9% stake in The CrownX - the owner of the WinMart and WinMart+ store chains, further affirming its interest and ambition in the Vietnamese market. Just from October 1 to date, Long An has awarded investment certificates to 15 new projects in industrial zones of the province, leading the country with 35 FDI projects.

As many as 100 countries and territories invested in Vietnam in the first 11 months of 2021. Singapore was the biggest investor with over US$7.6 billion, accounting for 28.7%, followed by South Korea with US$4.36 billion, accounting for 16.5% and rising 17.6% from a year ago. Japan ranked third with US$3.7 billion, up 54%, followed by China, Hong Kong (China) and Taiwan (China).

Most recently, on December 8, LEGO Group signed a memorandum of understanding (MoU) with Vietnam Singapore Industrial Park Joint Venture Company Limited (VSIP) to build a new factory in Vietnam. The project, costing more than US$1 billion, is expected to be deployed in the second half of 2022 and start operation in 2024, and employ 4,000 workers. This is the sixth LEGO factory in the world and the second in Asia, showing the attraction of the Asian market in general and Vietnam in particular.

In addition to receiving new investment projects, many localities are also preparing new premises and creating the best conditions to welcome big investors. Infrastructure projects are also accelerated to welcome investors. Some localities such as Bac Ninh, Long An and Binh Duong have developed a new model to execute Resolution 50 of the Politburo on institutional and policy improvement, quality and efficiency of foreign investment cooperation to 2030.

The prospect of FDI inflows to Vietnam appears to be very positive. The Government's official announcement of the national list of projects seeking foreign investment in 2021 - 2025 is a way to further open the door to welcome foreign capital flows. This information is further reinforced when high-ranking Vietnamese delegations usually combine investment promotion during their trips abroad. Their message is that Vietnam always appreciates and facilitates investors to do business effectively and sustainably in Vietnam.

By Thu Ha, Vietnam Business Forum