Vietnam's New Position in Attracting FDI

9:24:37 AM | 2/22/2022

Despite two years of struggling with the COVID-19 pandemic, Vietnam's international trade activities still set a new record by taking advantage of great opportunities from free trade agreements such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the EU–Vietnam Free Trade Agreement (EVFTA).

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After trade opportunities, Vietnam will see opportunities to attract foreign investment and promote the growth of foreign investment capital into the country.

Expectations of a breakthrough

From the beginning of 2022, foreign direct investment (FDI) attraction activities have been taking place quite actively in 30 provinces and cities across the country, according to the Foreign Investment Agency. Many FDI projects continue to expand in scale, entering the stage of stable operation in Vietnam.

FDI capital into Vietnam reached more than 2.1 billion USD in January 2022, up 4.2 percent over the same period last year. In which, supplemented capital and capital contribution and share purchase by foreign investors in Vietnam increased sharply. As many as 71 FDI projects registered to adjust capital with total supplemented capital of over 1.27 billion USD, up 54.3 percent in the number of projects and up nearly 2.7 times in capital compared to the same period last year.

Investors also made 206 turns of capital contribution and shares purchase at Vietnamese enterprises in January, with total contributed capital of 443.5 million USD, up 2 times over the same period last year. Although the total registered capital of new projects decreased sharply (over 70 percent) due to the absence of billion-dollar projects, the number of projects granted investment certificates rose 2.2 times over the same period in 2021.

A series of FDI projects increased capital and expanded scale in the first days of the new year. A Chinese invested project that manufactures electronic products, network equipment and multimedia products raised its investment capital by 260 million USD in Nghe An Province, the GE Vietnam commercial and service project by the Republic of Korea investor expanded their investment capital by 216.9 million USD in Bac Ninh Province, and an electronic component factory by the Republic of Korea investor increased capital by 163 million USD in Phu Tho Province.

Workers assemble air conditioners at Daikin Vietnam JSCat Thang Long II Industrial Park in Hung Yen Province. (Photo: Song Toan)

Prof., Dr. Nguyen Mai, chairman of the Vietnam Association of Foreign Investment Enterprises (Vafie) told Nhan Dan Newspaper that Vietnam could attract about 40 billion USD in registered FDI capital in 2022 and 22 billion USD in disbursed capital, as per the target set out in the Politburo’s Resolution 50. These figures are based on the forecasts of domestic and foreign research organisations as well as the improvements to the investment and business environment of Vietnam, particularly positive movements in attracting FDI.

Accordingly, the United Nations Conference on Trade and Development (UNCTAD) forecast that the global FDI inflows could increase to 1.2 trillion USD in 2022 and return to pre-pandemic levels by 2023. UNCTAD's own report on ASEAN announced at the end of 2021 also produced optimistic forecasts, in which Vietnam remains a successful FDI attraction country and a promising destination for foreign investors.

Moreover, the recent surveys by the American Chamber of Commerce in Vietnam (Amcham) and the European Chamber of Commerce in Vietnam (Eurocham) also showed that 60-65% of their member enterprises intend to expand their operations in Vietnam in 2022.

Renewing the way of investment promotion

Vietnam's position in attracting FDI is now different. With the orientation of attracting new-generation FDI towards high-tech FDI projects with spillover effects on socio-economic development, many localities have said no to small and outdated technology projects in recent years.

There are many textiles and footwear projects with investors who, if given “nods” by localities, are ready to implement their projects very quickly, but they have not been selected because they fail to meet the new requirements of FDI attraction.

Vietnam has so far signed and implemented more than 10 free trade agreements (FTAs) with many countries and regions around the world, helping Vietnam to continuously achieve new records in terms of import and export and enter the list of Top 20 leading economies in terms of international trade.

Prof., Dr. Nguyen Mai expressed regret that the investment trend from the US and European markets into Vietnam is not as strong as the trade flow. “The main reason is that Vietnamese businesses are just interested in trade and have yet to take advantage of opportunities to attract investment from these markets. But there is also an objective fact that trade always precedes investment. Following the expansion of trade flow under FTAs, there will hopefully be a strong international investment flow with high-quality capital in the future,” the expert said.

However, in the context of limited capital supply and the heavy impact of the COVID-19 pandemic, countries have taken advantage of attracting external resources to maintain and recover their economies. Therefore, competition in FDI attraction is increasingly fierce among developing countries with similar markets, development levels, technology and labour.

Minister of Planning and Investment Nguyen Chi Dung said that the Ministry has recently held many talks with senior leaders of corporations and multinational companies to discuss investment plans and remove difficulties for investors in order to maintain Vietnam’s attractiveness in the eyes of investors.