Vietnam’s 2024 FDI Landscape Poised to See Robust Growth

Vietnam had over 39,000 valid projects and a total registered capital surpassing US$473.1 billion as of February this year, reaffirming its status as a highly desirable location for foreign investment.

This article examines Vietnam’s dynamic investment climate, top sources of foreign direct investment (FDI), and prominent target sectors for foreign capital.

Vietnam’s current FDI landscape

According to Vietnam’s Foreign Trade Agency, the country experienced a surge in FDI in January and February of 2024, recording an influx of over US$4.29 billion, marking a significant increase of 38.6 percent compared to the previous year.

During this period, Vietnam granted investment certificates to 405 new projects, with a total registered capital of US$3.6 billion, showcasing a 55.5 percent uptick in volume and double the value recorded same time last year.

Moreover, 159 projects saw capital adjustments. The FDI disbursed in the first two months of 2024 amounted to US$2.8 billion, expanding 9.8 percent compared to the same period in 2023.

Attracting the most FDI were Hanoi, Quang Ninh, Thai Nguyen, Ba Ria – Vung Tau, Bac Ninh, Dong Nai, Bac Giang, Ho Chi Minh City, Hai Phong, and Hung Yen. These 10 regions accounted for 81.7 percent of the FDI received by Vietnam during January-February. Out of them, capital Hanoi led the pack with nearly US$914.4 million, which was up 24.4 times that recorded in the same period in 2023.

Top sources of FDI in Vietnam

During the first two months of 2024, Singapore, Hong Kong, Japan, and mainland China were among the top sources of FDI out of 48 countries and territories with investments in Vietnam. A comparison with 2023 data reveals a similar trend.

In 2023, Singapore led as the primary source of foreign investment, injecting US$6.8 billion, constituting 18.6 percent of the total FDI. Japan closely followed in second place, representing 17.9 percent of the total, while Hong Kong (China) secured the third position, contributing 12.8 percent of the total. Following closely were mainland China and South Korea.

Key invested sectors

Between January and February 2024, investors injected capital into various sectors of Vietnam’s economy, with the processing and manufacturing industry taking the lead. This is well aligned with 2023 data, which saw the processing and manufacturing industry lead the way with investments exceeding US$23.5 billion, accounting for 64.2 percent of the total and marking a 39.9 percent increase year-on-year.

Additionally, foreign-invested businesses posted a trade surplus of US$8.25 billion in January-February.

In 2024, Vietnam presents investment prospects across multiple frontier industries. The technology industry is experiencing a great deal of innovation and digitalization. Similarly, the renewable energy sector is gaining traction, with a rising focus on clean energy sources like solar and wind power to sustainably bolster Vietnam’s power supply. Moreover, there is great anticipation regarding the demand-driven growth of the med-tech field and other healthcare-related industries.

Attractive environment for high-tech ventures: Decree 10/2024/ND-CP

On February 1, 2024, the government released Decree 10/2024/ND-CP,formally rolling out new measures to incentivize high-tech parks and businesses within them.

Under Decree 10/2024, which is effective from March 25, 2024, investors venturing into infrastructure projects within high-tech parks will enjoy a range of benefits, including exemptions from land lease fees and reimbursement for land clearance expenses.

There are also stipulations in the Decree for establishing and expanding high-tech parks.

Hanoi a prime investment destination

Hanoi, the vibrant capital of Vietnam, has solidified its position as a top-tier investment destination, attracting substantial foreign investment in the early months of 2024. The city attracted an impressive total of US$914.4 million in foreign investment during this period, reflecting a robust surge in economic activity.

Comprising 27 newly licensed projects amounting to US$869.8 million, along with 17 projects receiving additional investment of US$9.1 million, and 21 instances of foreign investors contributing capital or purchasing shares totaling US$35.45 million, Hanoi showcases a diverse and dynamic investment landscape.

Data from the Hanoi Statistics Office reveal noteworthy insights into the city’s investment profile:

In January, Hanoi attracted US$866.8 million in FDI, with 10 newly licensed projects contributing US$859.4 million. Additionally, foreign investors actively participated in seven ventures, injecting US$2.3 million into the capital’s economy.

In February, the city maintained its momentum, approving 17 new foreign-invested projects totaling nearly US$10 million in registered capital. Alongside, adjustments to 11 existing projects increased the registered capital by US$4 million.

Hanoi’s allure as an investment destination is further bolstered by its reputation as a welcoming environment for high-tech ventures. The city’s proactive approach extends beyond policy frameworks to the development of specialized industrial zones, particularly those catering to high technology sectors.

The city has long been at the forefront of Vietnam’s digital evolution, driven by a youthful and educated workforce. This attractive demographic has enticed renowned companies like Intel, IBM, Samsung Display, Nokia, and Microsoft to establish their presence in the country.

Why invest in Vietnam?

Vietnam stands out as a compelling investment destination among emerging markets. The country’s appeal is consolidated by several factors, including (but not limited to):

Strategic location: Situated in Southeast Asia and along key shipping routes, Vietnam serves as a strategic hub for manufacturing and trade, besides offering unparalleled access to lucrative markets like China.

Growing economy: With a robust GDP growth trajectory consistently surpassing global and regional peers, Vietnam’s dynamic economy presents a fertile ground for long-term investment, backed by resilient economic fundamentals.

Stable government: Underpinned by a stable government with a clear economic vision, Vietnam offers a conducive investment environment characterized by fair policy control, minimal investment barriers, and robust incentive schemes, ensuring investor confidence and stability.

Ease of doing business: Continuously improving ease of doing business rankings underscore Vietnam’s commitment to facilitating foreign investment, streamlining bureaucratic processes, and enhancing transparency for investors seeking hassle-free business operations.

Industrial zones: Well-developed Economic Zones, Industrial Parks, Business Districts, and Residential Centers provide investors with a conducive ecosystem for establishing and expanding their operations, equipped with modern infrastructure and amenities.

Strong FDI environment: As discussed in the above sections, Vietnam’s robust FDI environment further highlights investor confidence and commitment to long-term growth prospects.

Growing consumer spending: With a population exceeding 95 million and a burgeoning middle class driving consumer spending, Vietnam offers a fertile market ripe with opportunities across diverse sectors, particularly in the rapidly expanding services segment contributing over 40 percent to GDP.

Network of FTAs: As a signatory to over 18 Free Trade Agreements (FTAs), Vietnam enjoys preferential trade advantages across the Asia-Pacific region, ASEAN, Europe, and beyond, providing investors with greater access to global markets and supply chains. Moreover, the country’s membership in the WTO and adherence to major international Intellectual Property Protection conventions underscore its commitment to aligning with global legal frameworks, ensuring investor protection and intellectual property rights enforcement.
Summary

Vietnam presents abundant opportunities for FDI. Looking ahead to the rest of 2024, emerging prospects, particularly in high-tech sectors, hold significant promise for new and mature investors.

Government policies and long-term incentive programs contribute to this favorable investment climate by prioritizing regional administrative reform, fostering PPPs, and providing tax breaks to enterprises in encouraged industries and lesser developed localities.

Source:Vietnam Briefing