Foreign direct investments in Vietnam continue to grow

By Eurasia Business News – February 22, 2021

The Vietnamese economy has been hit hard by the ongoing COVID-19 pandemic, but has shown remarkable resilience. The Vietnam’s GDP grew 2.9% in 2020. Picture : View on Ho Chi Minh City, also known as Saigon, the largest city of Vietnam. Photo credit : Pixabay

In a context of a global decline of FDI, Vietnam has managed to attract more than USD 28.5 billion of foreign investment in 2020, according to the Ministry of Planning and Investment, reported the newspaper Le Courrier du Vietnam.

This represents a 25 percent year-on-year decline for this Southeast Asian country, but the adjusted capital of investments increased by 10.6 percent compared to the same period of 2019.

According to the World Bank, the Vietnamese economy attracted USD 16.12 billion in foreign direct investments in 2019, after USD 15.5 billion in 2018.

Inflows in 2019 went mainly into manufacturing. Strong investment from Japan and the South Korea and from intraregional sources played a role in sustaining the high level of FDI. Amid trade tensions between China and the United States, companies such as Intel (United States), Nintendo (Japan) and Kyocera (Japan) have relocated operations from China to Vietnam.

The Vietnamese economy has been hit hard by the ongoing COVID-19 pandemic, but has shown remarkable resilience. The Vietnam’s GDP grew 2.9% in 2020.

Registered FDI in Vietnam reached about USD 2 billion in January 2021, 3.9 % lower than in the previous month, and 62.2 % lower than January 2020, reported the World Bank. This decline was primarily driven by a drop in greenfield investments (70.3 %) and acquisition (58.7%). The high level of FDI inflows in January 2020 was largely explained by one project in the gas sector by the Russian Novatek which started a liquefied natural gas project in 2019.

These figures prove that Vietnam remains an attractive investment destination for FDI companies. The increasing inflows of FDI result in part from the focus on improving institutions, policies and the quality and efficiency of foreign investment cooperation.

Lawmakers of Vietnam have also adopted important legislation relating to investment and business.

Read also : Asia-Pacific countries sign world’s largest free-trade agreement

These efforts on the national scale are strengthened by an active economic diplomacy aiming at attracting foreign investors and more trade.

Vietnam signed with the European Union a Trade Agreement and an Investment Protection Agreement in June 2019. The Trade Agreement entered into force on 1 August 2020. The Investment Protection Agreement will enter into force when it is ratified by all EU Member States. When he enters into force, this treaty will replace the bilateral investments treaties concluded by Vietnam and the European Member States individually.

The trade agreement between Vietnam and the European Union removes customs duties, paper works and other obstacles European companies face when exporting to Vietnam. It also facilitates trade in essential goods such as electronics, food and pharmaceuticals. In addition, this agreement will open the Vietnamese market to EU service exports, such as transport and telecommunications.

Hanoi assumes the role of bridge between Europe and East Asia, being part of an Agreement on trade and investment but also of the Regional Comprehensive Economic Partnership signed on November 15, 2020 under the leadership of China between fourteen other countries of Asia-Pacific. It is the largest trade agreement in the world, representing 30% of global GDP and 2.2 billion consumers.

Lastly, Vietnam signed on December 29, 2020 a Free Trade Agreement with the United Kingdom of Great Britain and Northern Ireland.

Read also : EU and China reach agreement in principle on investments

To attract more foreign investors, the Vietnamese government has been investing in improvement of the infrastructures of its industrial parks and economic zones. At the end of 2020, the Prime Minister approved 19 coastal economic zones covering a total area of ​​approximately 871,000 ha. This choice of developing special economic zones (SEZ) on the sea coast can be explained by the miracle development of some SEZs in China, the UAE, and Singapore. Vietnam wants to repeat this success by attracting new foreign investors in high value industrial projects and by preparing its economy to the entry into force of the regional free-trade agreements concluded with the Asia-Pacific partners and European states.

In a context of relocation of investments in Asia, Vietnam is an attractive economy, able to provide investors with stable economic indicators, a favourable geographical position, between Europe, Africa and Eastern Asia, as well as an educated and skilled workforce.

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