Advantages help Vietnam become the strongest "magnet" to attract FDI in Southeast Asia

29/09/2023    152

According to Global Finance, among Southeast Asian countries, Vietnam possesses countless factors to become a favorite investment destination for FDI capital flows.

"Magnet" attracts FDI

Vietnam has the advantage of a young population with the number of people under the age of 25 accounting for about 40% of the population. Therefore, Vietnam's demographics become an advantage in the context of an increasingly aging world population.

Besides, the cost labor in Vietnam is quite low, the labor force is large and highly educated. With its geographical location next to China, Vietnam has easy access to the country's market of 1,2 billion consumers.

At the same time, because it is in the ASEAN group, Vietnam also has the advantage of accessing tariff-free markets for essential goods of Southeast Asia with about 800 million people. This position is also thanks to Vietnam's adoption of many policies friendly to foreign investors.

Exchange with Global Finance, Mr. Thierry Mermet, CEO of Source Of Asia - consulting organization for companies looking for opportunities business in Vietnam and ASEAN - commented that the 2023 outlook for the business environment in Vietnam shows promising signs of improvement.

Capital from foreign direct investment reached about 10 billion USD in the first quarter of this year, up 0,5% over the same period in 2022.

The Source Of Asia leader predicts this trend will continue: “Our forecast for the next quarters is also very positive. Companies are really expecting to receive similar levels of foreign direct investment into Vietnam in the near future."

“In the long term, Vietnam is really strengthening its position as one of the top three places where leaders enterprise Europe wants to invest", This expert emphasized.

Attractive destination

According to a report on the business confidence index conducted by the European Chamber of Commerce in Vietnam (EuroCham), an additional 3% of business leaders chose Vietnam as one of the top 3 investment destinations.

In the first half of this year, 90 countries and territories invested in Vietnam. The 5 countries investing the most are Asian countries, with Korea leading the total FDI capital of 81 billion USD. Next are Singapore and Japan, with total FDI investment in Vietnam of 72 billion USD and 70 billion USD, respectively.

Notably, although the US ranks 7th, it is Vietnam's most important export partner with a trade turnover of 110 billion USD in 2022.

Mr. Thierry Mermet cited Thomson Medical Group - one of Singapore's largest private healthcare service providers - which spent 381,4 million USD to acquire FV Hospital in Ho Chi Minh City.

"This deal not only marks Thomson's presence in the Vietnamese market but also helps this country take advantage of growing medical service opportunities from neighboring countries," the expert commented.

Another sign of Vietnam's attractiveness is that electric vehicle manufacturer VinFast recently became the largest automobile manufacturer in the world by market capitalization, second only to "giants" such as Tesla or Toyota.

Vice President of Tomkins Ventures Barry Elliott - a long-time supply chain expert in Vietnam - believes that this not only signals a promising future for the electric vehicle industry in Southeast Asia in general but also demonstrates Vietnam's emerging manufacturing capabilities.

Not only that, experts also say that Vietnam also benefits greatly from the US-China trade war. The US's move to impose higher tariffs on many Chinese exports has pushed many of its production lines from China to alternative centers in Asia.

“This trend has been reinforced by the Covid-19 pandemic, as prolonged disruptions have created chaos in global supply chains for many industries, including automotive and electronics,” Mr. Barry Elliott emphasized.

The Japanese government fueled this trend in 2020 by introducing a subsidy program for Japanese companies to move production out of China, back to Japan or to some other country.

Continue to attract investors

"Since 2020, Vietnam has been one of the favorite destinations for Japanese companies when they choose to move production to the ASEAN region and this trend will continue," said vice president of Tomkins Ventures. with Global Finance.

Recently, Ms. Jacqueline Poh, executive director of the Singapore Economic Development Board, met with startups in the fields of financial services, robotics and renewable energy. She believes that Vietnamese businesses are courageous and have the spirit of supporting each other.

“This powerful combination has created a favorable local startup ecosystem. The 14 Vietnam-Singapore Industrial Parks (VSIP) have currently attracted 18,7 billion USD of investment and have created 300.000 jobs in Vietnam," she shared.

According to Carsten Ley, CEO of Asia PMO consulting company, not only Japanese businesses but many Korean companies are also investing heavily in Vietnam. Not only that, Apple also moved the AirPods production line from China to Vietnam and Lego also just started construction on a giant factory in Binh Duong.

According to the leader of Asia PMO, Vietnam is upgrading the value chain from footwear and garments to the high-tech field. Vietnamese fintech companies are growing strongly such as Momo, ZaloPay, VNPay or foreign startups.

“Capital spending is expected to grow rapidly, reflecting continued strong growth in foreign direct investment by multinational companies as well as domestic infrastructure spending,” Carsten Ley shared. with Global Finance.

He also said that Vietnam is becoming more and more attractive in the eyes of foreign investors and it is not surprising that venture capital funds are more present in Vietnam.

Ms. My, President of Jungle Ventures Venture Capital Fund, said that venture capital funds in Vietnam originate from all over the world, with increasing interest from the West, including the US.

However, she also pointed out many challenges in investing in the Vietnamese market.

Specifically, according to her, the legal framework, especially for financial services, is very complex. There are many restrictions on foreign ownership, such as with the insurance sector. Besides, language and communication are still considered a barrier.

However, despite the above series of challenges, the Chairman of Jungle Ventures Venture Capital Fund is still confident and affirms: "The best is yet to come."