Processing, Manufacturing Continue to Lead the Way in FDI Attraction

2:26:02 PM | 4/5/2023

The absence of giant projects led to a steep slump in FDI flows into Vietnam in the first three months of 2023.

Processing and manufacturing took the lead in FDI attraction with a total investment of nearly US$4 billion in the first 3 months of 2023

Data released by the Foreign Investment Agency (FIA) under the Ministry of Planning and Investment showed that foreign investors invested nearly US$5.45 billion in the year to March 20, equal to 61.2% of the value a year earlier.

Decline in both registered capital and realized capital

According to FIA, this decline was attributed to a robust FDI growth in the three months of 2022, with US$1.32 billion from LEGO Group, which accounted for 41% of fresh FDI funds in the January-March of 2022.

Meanwhile, the value of foreign funds spent on equity deals also tumbled, while the added FDI fund did not pick up as compared to the first two months of 2023.

“However, the number of newly invested and additionally invested projects was more than a year earlier,” said FIA.

Specifically, in the March quarter, 522 new projects were licensed, with a combined registered capital of more than US$3 billion, up 62.1% in projects but down 5.9% in value from the same period of 2022.

In addition, as many as 234 projects registered to adjust their investment value, adding more than US$1.21 billion, up 2.6% in projects but down 70.3% in value.

According to FIA, added capital also slipped from a year-ago period because not many large projects revised up their investment value. Optimistically, the declining pace slowed down as compared with the first two months. In March, the number of additionally invested projects rose 2.6%, compared with a 6.3% shrinkage in the first two months.

Moreover, foreign investors completed 703 equity purchase deals worth nearly US$1.22 billion in the first three months of the year, down 4.2% in deals and 25.5% in value.

Furthermore, Vietnam also witnessed a 2.2% decline in disbursed FDI funds to US$4.3 billion, according to FIA. However, this decline eased from the two previous months.

Fresh FDI loses steam

Remarking on foreign investment into Vietnam in the March quarter, FIA said that the structure of foreign investment capital also changed from 2022.

Specifically, the share of new funds increased (accounting for more than 55.5% of total investment fund, compared to 36% in the same period of 2022) while the share of added capital contracted (accounting for 22.2% versus 45.6% from a year earlier). The share of capital contribution and share purchase by foreign investors rose slightly from 18.3% to 22.3%.

In particular, although new investment capital in March could not keep up as strong momentum as in the first two months, the number of new investment projects continued to be higher than a year-ago period and much higher than in the first two months of 2023.

“This showed that small and medium foreign investors continue to care and believe in Vietnam's investment environment when they make new investment decisions. Besides, this is signaling that large corporations are cautious about making big investments in Vietnam in the context of the global minimum tax policy,” said FIA.

According to FIA, projects with less than US$1 million of investment capital accounted for nearly 70% of new projects but just nearly 2.2% of the total registered investment capital.

Besides, new investment projects were still focused on provinces and cities that have more advantages (good infrastructure, stable human resources, friendly administrative procedures and effective investment promotion efforts) like Bac Giang, Dong Nai, Bac Ninh, Ho Chi Minh City and Hai Phong.

Foreign financiers poured funds into 17 out of 21 national economic sectors. Of which, processing and manufacturing continued to lead the way with a total investment of nearly US$4 billion, followed by real estate with nearly US$766 million.

According to FIA, 67 countries and territories invested in Vietnam in the first three months of 2023. Asian investors still accounted for a big share. Singapore was the largest investor with nearly US$1.69 billion, accounting for nearly 31% of the total, down 26.3% year on year. China ranked second with nearly US$552 million, or 10.1% of the total, down 38.3%.

Taiwan ranked third with more than US$477 million, accounting for nearly 8.8% of the total, up 47.5% year on year, followed by South Korea, Hong Kong and the Netherlands.

Chinese investment capital skyrocketed, surpassing Taiwan and South Korea to be the second largest investor in Vietnam in the first quarter, with one large project (US$140 million) that manufactures batteries, accumulators and solar panels in Bac Giang province.

Source: Vietnam Business Forum