Vietnam - Attractive Destination for FDI Inflows

Foreign direct investment (FDI) into Vietnam continued its strong growth in the first 10 months of 2024, reaffirming the country’s position as an attractive investment destination in the region and globally.

Growth in FDI inflows is driving exports and production in Vietnam, particularly in key manufacturing and assembly sectors

Vietnam is becoming a top destination for FDI, with registered capital exceeding US$27 billion in the first 10 months of 2024, up nearly 2% from last year. FDI inflows, especially in high-tech and digital industries, continue to grow, strengthening Vietnam’s position as a global investment hub.

According to the General Statistics Office, FDI disbursement in Vietnam reached US$9.58 billion in the first 10 months of 2024, up 8.8% from the previous year. This growth signals that Vietnam's economy continues to attract foreign investment, driving economic momentum, especially as production shifts from China to ASEAN countries.

The “Vietnam Industrial Sector 2024: The New Wave” report by Savills Vietnam, released on November 8, highlighted key factors driving Vietnam’s industrial success, including a young and dynamic workforce, government incentives, free trade agreements and improved infrastructure. High-tech sectors such as electronics, automotive components and semiconductors are leading in attracting FDI, with large-scale, high-value projects. Troy Griffiths, Deputy Managing Director of Savills Vietnam, remarked that Vietnam has transitioned from a low-cost labor manufacturing hub to a more advanced, high-tech economy with significant production capacity.

Among the 76 countries and territories with new investments in Vietnam over the past 10 months, Singapore ranked as the largest investor with US$4.98 billion, accounting for 32.7% of the total newly registered capital, followed by South Korea with US$2.08 billion, China with US$2.07 billion, and Hong Kong (China) with US$1.69 billion. Notably, China led in the number of new projects, accounting for 28.6% of the total, reflecting accelerating inflows from China, Hong Kong and Taiwan. There is also a notable rise in high-tech projects in areas such as electronic components, semiconductors, renewable energy and electric vehicles.

Major companies like Apple and Foxconn have made substantial investments in Vietnam. Apple has moved 11 manufacturing facilities to Vietnam, while partners like Foxconn, Luxshare and Goertek are expanding their operations. A Singaporean factory in Bac Ninh has also invested an additional US$1.07 billion. These moves highlight the shift in production to Vietnam and the growing opportunity to develop supporting industries.

According to Dr. Nguyen Quoc Viet, Deputy Director of the Vietnam Institute for Economic Policy Research (VEPR), the growth in FDI inflows is providing a strong impetus for exports and production in Vietnam, especially in key manufacturing and assembly industries like electronics, textiles, footwear, and wood products. These are not only driving FDI growth but also contributing significantly to Vietnam's export revenue.

However, in high-tech fields, Vietnam currently participates primarily in assembly and processing stages. Viet suggested that to further advance these sectors, Vietnam needs to attract more major investors to high-tech projects such as data centers, artificial intelligence and the Internet of Things (IoT). Large corporations choosing Vietnam as a production hub will bring capital and technology, helping to build high-tech value chains and create many high-quality job opportunities.

Experts believe that Vietnam’s stable economic growth, ongoing administrative reforms, and strong infrastructure investment are creating a highly attractive environment for global capital. According to the European Chamber of Commerce (EuroCham) in Vietnam, many European businesses are planning to expand in Vietnam, with over half intending to establish additional production facilities or representative offices in major cities such as Hanoi, Ho Chi Minh City, Da Nang and Can Tho. Additionally, the Q3 2024 EuroCham Business Confidence Index (BCI) report revealed that 67% of European businesses view Vietnam as an appealing investment destination. Bruno Jaspaert, EuroCham President, emphasized that this result underscores Vietnam’s role as a strategic business center in Southeast Asia.

With its strong growth potential, Vietnam is playing an increasingly vital role in the global supply chain. To capitalize on this, companies must focus on long-term, high-tech and sustainable investment strategies. Experts also stress the need for ongoing infrastructure improvements, policy reforms and a skilled workforce to maintain Vietnam's competitive edge in attracting FDI.

By Giang Tu, Vietnam Business Forum