Foreign Investors Remain Confident in Vietnam’s Business Environment

Despite the impact of the pandemic, political instability, and inflation, foreign investors continue to put their faith in Vietnam’s economy and business investment environment.

According to statistics of the Ministry of Planning and Investment, as of December 20, 2022, it is estimated that foreign investment projects (FDI) have disbursed nearly US$ 22.4 billion, up 13.5 % over the same period in 2021. In the context of many difficulties in the world, foreign organizations still consider Vietnam an attractive destination for foreign investment flows, because this is an important area to carry out processing and manufacturing projects to supply ASEAN and world markets. Timely decisions of the Party, State and Government, especially during the COVID-19 period have created a firm belief for foreign investors to continue pouring investment capital into Vietnam.

Mr. Niels B. Christiansen, CEO of LEGO Group, said: “LEGO has invested in building the 6th factory in Vietnam and also the first carbon neutral factory of the Group. This factory will participate in the supply chain as an equal to the other 5 factories. We will supply all products made in Vietnam to customers throughout Southeast Asia. Vietnam's economic recovery after the pandemic has created confidence for LEGO's long-term development in Vietnam.”

However, the decrease of newly registered FDI inflows into Vietnam is still worrying, especially in the context that fiscal easing policies and stimulus packages in each country are the driving force behind global FDI inflows. Statistics as of December 20, 2022 show that the total newly registered capital, adjusted and contributed capital to buy shares and buy capital contributions from foreign investors reached nearly US$ 27.72 billion, decreased by 11% from the same period in 2021.

Chairman of the European Business Association in Vietnam Alain Cany affirmed: “The European business community appreciates the investment environment in Vietnam, especially after the clear commitments and orientations from COP26 on attracting high-quality investment and green growth. Vietnam is on a journey towards realizing its commitment to go hand in hand with action, creating a favorable legal and financial environment to support the energy transition, promote sustainable growth, and transform technology. In my opinion, Vietnam should not look at the number of new investments, but should look at the high disbursement rate.”

In addition, its trade position with signed Free Trade Agreements is helping to connect Vietnam with the ASEAN region and the world, which is a competitive advantage. According to the Ministry of Planning and Investment, as of December 20, there have been 108 countries and territories investing in Vietnam in 2022. In which, Singapore ranks first with a total investment of nearly US$ 6.46 billion, accounting for 23.3% of total investment capital in Vietnam; Korea ranks second with nearly US$ 4.88 billion; and Japan ranks third with a total registered investment capital of more than US$ 4.78 billion, accounting for nearly 17.3% of total investment capital.

Realized FDI in the processing and manufacturing industry accounts for 60.6% of the total registered investment capital. In particular, in 2022, many semiconductor manufacturing investment projects have appeared, raising the quality of Vietnam's FDI flow. This amount of capital focuses on high-quality, sustainable development projects from large corporations such as Apple, Lego, Samsung, etc. These projects are gradually replacing small projects.

General Director of Zamil Steel Vietnam (ZSV) Krishnakanth Kodukula affirmed: “With a convenient geographical position for trade, abundant labor resources and a stable political background, Vietnam has been rising to become one of the new factories of the world and will become the ideal destination when the global supply chain moves. The vision of Zamil Steel Corporation and Zamil Industrial Investment & Industry Group in Vietnam is long-term and we always consider Vietnam as the gateway to reach other markets throughout the Asia-Pacific region."

“Vietnam offers great investment opportunities for European businesses and we are excited about the country's prospects in the medium to short term. Vietnam will certainly be in a better position in the next two or three years and will prove to be one of the most dynamic business and investment destinations,” affirmed Alain Cany.

Mr. Shimizu Akira 
Chief Representative of JICA Vietnam
In 2023, Vietnam and Japan will celebrate the 50th anniversary of diplomatic relations, so I believe that cultural exchanges and people-to-people connections between the two countries will be more exciting than ever. Towards this important milestone, JICA will continue to make efforts to contribute more to Vietnam's development through official development assistance (ODA) while fostering people-to-people connections to reinforce and develop the 50-year friendship and take long strides in the bilateral relationship in the coming time.
The first is cooperation in high-quality infrastructure development to support Vietnam's economic development. In the past four years, Vietnam's loans granted by international donors, including JICA, were 16-20% lower than before. This is a good sign that Vietnam's economy has kept growing and influencing the international market. However, to develop sustainably, a country needs to invest in infrastructure development. I believe that Vietnam can completely use ODA loans with a long repayment majority of 30-40 years and low, fixed interest rates as a tool to mobilize capital for infrastructure development.

Especially, in ODA-funded infrastructure development projects, Vietnam can grasp foreign technologies and Vietnamese companies can be present there for a long time of project implementation. As a result, Vietnam can take technology and experience in construction or maintenance management after projects end, thus enhancing projects' effectiveness.

So far, Vietnam has always maintained a stable economic growth rate, but the driving force behind this growth is export and investment expansion. I hope that Vietnam will continue to use ODA effectively and regard this as a convenient way of raising capital as well as an effective way to bring advanced foreign technologies to be applied in Vietnam.

The second is human resource development. JICA continues to advance technical cooperation and loans for Vietnam Japan University to open more doctoral training programs and establish a new campus in Hoa Lac from 2023 to make Vietnam Japan University a general university for 6,000 students to study at a time. In addition, JICA plans to deploy technical cooperation to enhance job opportunities for technical interns. The project aims to create a better working environment for Vietnamese workers in Japan by eliminating illegal job brokerage, which has been a problem in recent years.
The third is the health sector. JICA launched the "Global Health Initiative" as soon as the COVID-19 epidemic subsided. JICA is committed to further cooperation in building a resilient society with strong response to emerging infectious disease threats. Vietnam is a model country in this initiative.

Finally, I would like to introduce carbon neutrality, that is to say, bringing greenhouse gas emissions down to “zero”. In addition to the Loan Agreement for Wind Power Project Development in Quang Tri province, JICA is also considering new loans for various wind power and solar power generation projects. Moreover, JICA is advancing cooperation in various issues suitable to Vietnam's needs, like supporting introducing and amending the Law on Environmental Protection; sending more experts on green growth and experts on drainage policy; implementing eco-smart industrial parks in Ba Ria - Vung Tau province; promoting circular economy; and adopting climate change countermeasures towards carbon neutrality by 2050 as the target that the Government of Vietnam is aiming for. 

Mr. Kim Ki Mun
Chairman of Korea Federation of Small and Medium Business
South Korea is currently Vietnam's leading trade and investment partner. Currently, about 8,000 South Korean companies in Vietnam are making Vietnam increasingly important to South Korea.

The signing of the Korea-Vietnam Free Trade Agreement between South Korea and Vietnam has made transactions by SMEs grow by 20%, and more than 90% of 8,000 South Korean companies in Vietnam are SMEs.

In particular, as the manufacturing sector accounts for 76.4% of total South Korean companies in Vietnam, there will be more opportunities for good cooperation between the two countries in establishing global supply chains in the future.

Vietnam has the 15th largest population in the world and Vietnamese students are typically enthusiastic and diligent. Population exchanges are also active, with about 170,000 Koreans living in Vietnam and 4 million Koreans visiting Vietnam every year, making Vietnam a friendlier country than other countries.

Domestic market development, manufacturing infrastructure development, excellent human resources, business-friendly government policies and cultural familiarities are advantageous relative to other countries.

In addition, the Vietnamese government announced a plan to reach even higher by 2045, on the 100th anniversary of the nation’s founding, becoming an advanced high-income country with a GDP per capita of US$10,000 given above advantages.

Before these prospects, the two countries are strengthening mutual cooperation through summit meetings to increase the bilateral trade value to US$100 billion by 2023 and US$150 billion by 2030. 

We can expect that there will be more companies collaborating in increasingly advanced industries with the continued growth of trade driven by cooperation between the governments, market entry hopes of enterprises and supplements of industries.
In addition, as South Korea and Vietnam are participating in IPEF, supply chain cooperation is likely to be accelerated and high-tech investment may increase naturally; these could be a starting point.

Mr. SIMON FRASER
Executive Director of the Australian Chamber of Commerce Vietnam  
I think after 2022, the free trade agreements between Australia and Vietnam have never been stronger. Talking about economic cooperation strategy, which has been signed for quite some time, also the CPTPP and now RCEP, which has just recently signed within the last 18 months come into play. It's very important at this time as we also explore the opportunities between the two countries with the enhanced economic engagement strategy, which was signed recently within the past 18 months as well. 

I think with the FTA, CPTPP is give us the opportunity to explore, explore opportunities in trade with those opportunities in trade increasing between the two countries that gives confidence between the two countries to further invest. And when we talk about FDI, which is quite low between the two countries at this time, I think that through increased trade you'll find that sort of confidence between the two countries to make further investments. 
I think for 2022, what we've seen is a lot of companies exploring opportunities outside of traditional markets and a very strong traditional market for Australia has been China. We see Vietnam as a China plus one. 

It's a great alternative to a lot of Australian companies wishing to take root and explore. Should be something to Asia and Vietnam is certainly a very strong vehicle for us entering 2023. There are very strong signs of growth for Vietnam and it also makes for a very strong environment for bidding for Australian investors to set up through stable government. The economy's very stable at this time. Also there's a ready workforce and a very well educated workforce, which lends itself very much to Australian industries looking to explore outside of Australia. 

Mr. Troels Jakobsen
Commercial Counselor cum Acting Deputy Ambassador of Denmark to Vietnam  
The number of Danish companies in Vietnam is double that of the other Nordic countries combined. Companies are increasingly moving towards supply chain diversification, and Vietnam is high on their list of options for expansion in Asia.

Vietnam is moving up the value-added ladder and is rapidly becoming an important hub for technology manufacturing.
Another attraction for Danish businesses is Vietnam's move towards renewable energy. Energy is a key determinant of investment in Vietnam.n

By Giang Tu, Vietnam Business Forum