Vibrant FDI Flows in Early 2024

11:03:04 AM | 3/7/2024

Vietnam has experienced a significant surge in foreign direct investment (FDI) since the beginning of 2024. This momentum is poised to drive another successful year of FDI attraction, particularly in emerging sectors such as electronics, semiconductors, renewable energy, high-tech agriculture, and the digital economy.

On January 10, during the reveal of Hai Duong’s 2021-2030 Provincial Planning, the province issued investment certificates for 27 projects, collectively valued at an impressive US$1.5 billion

Project and value growth

As of February 20, 2024, foreign investors demonstrated robust financial engagement in Vietnam, as evidenced by the substantial surge in newly registered capital, adjustments, and capital contributions, totaling over US$4.29 billion, up 38.6% compared to the corresponding period in 2023. This upswing, marked by 405 newly approved projects with investment registration certificates, reflects a 55.2% surge and an overall registered capital surpassing US$3.6 billion, more than double that of the previous year.

In the first two months of 2024, the escalation in newly registered investment capital can be attributed to both an increased number of projects (up by 55.2%) and projects with substantial investment capital (exceeding US$400 million and US$600 million). Foreign investors distributed their investments across 16 out of 21 national economic sectors, with the processing and manufacturing industry taking the lead, amassing nearly US$2.54 billion - constituting 59.1% of the total registered investment capital and a 16.8% increase from the preceding year.

The real estate business industry secured the second position with an investment capital of almost US$1.41 billion, contributing 32.7% to the total registered investment capital, more than 3.5 times higher than the corresponding period in the previous year. Following closely are the wholesale and retail industries, alongside professional, scientific, and technological activities, registering capital sums of US$125.2 million and nearly US$76.4 million, respectively.

In terms of geographical concentration, FDI is notably concentrated in provinces and cities with advantageous profiles, including Hanoi, Quang Ninh, Thai Nguyen, Ba Ria-Vung Tau, and Bac Ninh. Hanoi emerged as the primary recipient with a registered investment capital of nearly US$914.4 million, constituting 21.3% of the total registered investment capital, surging 24.4 times compared to the same period in 2023. This surge was primarily attributed to a substantial new investment project, totaling more than US$662 million, focused on developing a new urban area in Hanoi. Quang Ninh secured the second position with a total registered investment capital exceeding US$471.1 million, contributing nearly 11% to the country's total investment capital, followed by Thai Nguyen, Ba Ria-Vung Tau, and Bac Ninh.

In Dong Nai, commencing the year 2024, the Provincial People's Committee granted investment registration certificates to nine projects. Among these, eight are FDI projects, boasting a cumulative capital exceeding US$500 million. Notable among them is the SLP Park Loc An Binh Son Project at the Loc An-Binh Son industrial park, commanding a capital investment surpassing US$120 million. Furthermore, the Manufacturing Factory Project by Ryder Industries Vietnam Limited Liability Company at the Long Thanh Industrial Park carries a capital infusion of US$15 million. The K-Upa Vina Project at Nhon Trach I Industrial Park follows suit with a substantial capital of US$10 million. The Freudenberg & Vilene International Vietnam - Long Thanh project at the Loc An-Binh Son Industrial Park, marks an investment of US$10 million.

During the unveiling of the Hai Duong Provincial Planning for the expansive period spanning 2021-2030, with a vision to 2050, the province granted investment registration certificates and policies to 27 projects, collectively boasting an imposing scale of up to US$1.5 billion. Notable projects include the Stationery Manufacturing Factory of Deli Vietnam Office Technology Co., Ltd with US$270 million, the Biel Crystal Technology Manufacturing Company Limited's Project with US$260 million, and the Boviet Hai Duong Solar Photovoltaic Panel Manufacturing Factory Project with US$120 million.

Expert evaluations indicate that the early-year shift in both the quality and quantity of FDI reflects Vietnam’s proactive efforts to enhance the investment and business climate. This focus not only demonstrates the country’s commitment to reform but also lays the groundwork for sustained economic acceleration, breakthroughs, and long-term development.

Don't miss the opportunity to lure high-quality FDI

With a series of high-tech, electronics projects, Vietnam is considered a rising star in attracting FDI fund for the high-tech industry. In addition to political stability, low labor cost and macroeconomic stability, this allure has also been fostered by great effects from outstanding diplomatic relations with important partners such as the United States, China and Japan in 2023.

However, according to the Ministry of Planning and Investment, given global and regional complicated, unpredictable developments, rivalry in investment attraction will become much fiercer. In particular, the move by countries to apply global minimum tax rules will eliminate the role of traditional incentives (such as tax incentives and land incentives) in FDI attraction. Additionally, industries that need to be prioritized to attract and create breakthrough development in Vietnam such as high technology, innovation and energy do not have adequate mechanisms for investment attraction.

To seize the opportunity to attract high-quality FDI flows, according to the Ministry of Planning and Investment, in the coming time, Vietnam needs to further review and adjust appropriate foreign investment policies, with special attention to industries and fields that boost green growth and digital transformation such as renewable energy, waste treatment, green urban development, clean agriculture, research and development (R&D), information technology and innovation. The country needs to further reform administrative procedures pertaining to land, construction, fire prevention, environment and customs.

In addition, Vietnam continues to research and build breakthrough mechanisms for financial, securities and monetary policies; foster human resource training to meet development needs; promptly issue effective and flexible adaptation policies to the impact of the global minimum tax, ensure investor confidence and maintain the appeal of the investment environment.

At the same time, the country needs to prepare necessary conditions for infrastructure, clean land and energy development; accelerate public investment projects, especially traffic infrastructure projects, to meet investor requirements; choose breakthrough fields such as high technology, innovation, digital transformation, green transformation, financial center, semiconductor chip production, hydrogen and renewable energy.

By Thu Ha, Vietnam Business Forum