THE POSITIVE SIGNAL IN FDI INVESTMENT IN VIETNAM - OTIS LAWYERS

In the first 7 months of the year, Foreign Direct Investment (FDI) in Vietnam has experienced a remarkable reversal after several months of continuous decline. Vietnam continues to be targeted by foreign enterprises as one of the key investment destinations.

Vietnam remains an attractive destination

Approximately 16.24 billion USD of foreign direct investment (FDI) was registered in Vietnam in the first 7 months of 2023. According to the Foreign Investment Agency (Ministry of Planning and Investment), this figure increased by 4.5% compared to the same period in 2022 and 8.8% compared to the first 6 months of this year. In contrast, in the first 6 months, FDI decreased by 4.3% compared to the same period.

In July 2023 alone, total registered investment capital reached over 2.8 billion USD, an increase of 8.9% compared to June 2023, 41.9% compared to May 2023, and 85.7% compared to the same period in July 2022.

According to the Foreign Investment Agency, despite the declining trend of investment flows due to difficulties from the global economic recession, foreign investors are still determined to pour capital into Vietnam, including "mega" projects, demonstrating the investors' confidence in Vietnam's future growth prospects. The number of new investment projects has significantly increased compared to the same period. In fact, the rate of increase in new investment projects is nearly twice the rate of increase in total investment capital.

Notably, not only registered capital but also disbursed capital in the first 7 months increased slightly by 0.8% compared to the same period in 2022 (estimated at 11.58 billion USD). This indicates that the decisive measures taken by the Government and the Prime Minister in the early months of the year have been effective in supporting and overcoming difficulties for enterprises to implement investment capital disbursement.

The report from the Foreign Investment Agency highlights that new investment projects are still concentrated in provinces and cities with many advantages in attracting foreign investment (such as good infrastructure, stable labor force, efforts in administrative procedure reform, and proactive investment promotion), including Hanoi, Bac Giang, Ho Chi Minh City, Binh Duong, Dong Nai, Bac Ninh, and Hai Phong.

In particular, in the first 7 months of 2023, Hanoi is leading with a total registered investment capital of over 2.28 billion USD, accounting for nearly 14.1% of the total registered investment capital and increasing 2.76 times compared to the same period in 2022. Following Hanoi are Hai Phong, Ho Chi Minh City, Bac Giang, Binh Duong...

After the regular consultation on the Vietnamese economy in June, Paulo Medas, the head of the IMF Article IV mission, stated that like other countries around the world, Vietnam is facing difficult and complex external conditions such as global economic slowdown and rising interest rates. However, gradual relaxation of monetary policies, such as interest rate reduction, tax cuts, and expansion of public investment expenditure, has helped alleviate the impact of headwinds.

DBS Bank evaluates Vietnam as an attractive destination for FDI due to the shift in production trends, numerous free trade agreements (FTA), bright medium-term growth prospects at 6-7%, and a developing digital ecosystem.

Similarly, credit rating agency S&P Global Ratings believes that the increasingly educated and highly competitive young workforce is a major attraction for foreign investors, and it forecasts that the Vietnamese economy will recover in the next 24 months as global demand increases and Vietnam gradually addresses domestic challenges.

Expectations for FDI capital at the end of the year

Organizations and forecast experts predict that in the last few months of the year, the inflow of FDI into Vietnam will have even more positive signals due to the ability to realize investment opportunities through high-level diplomatic activities taking place in the first half of the year.

After the US delegation's visit to Vietnam for about 2 months, in mid-May 2023, Boeing officially inaugurated its new office in Hanoi. Similarly, Intel will continue to invest billions of USD in Vietnam in the coming time, after the success of its $1.5 billion project in Ho Chi Minh City. Intel is currently negotiating with the Vietnamese government regarding the mechanisms and policies for this project. Vu Tu Thanh, Deputy CEO of the US-ASEAN Business Council, said that US companies still have a positive outlook on Vietnam in the medium term. There will also be many other companies planning to visit Vietnam to explore due to the trend of supply chain restructuring and globalization continuing.

Recent positive information is the plan of Procter & Gamble (P&G) Corporation to expand its factory in Binh Duong. The representative of P&G Vietnam stated that the company currently has 2 factories in Binh Duong, with a scale of $300 million. In the future, P&G will invest an additional $100 million to expand the production line at the factory in Ben Cat (Binh Duong).

Meanwhile, at the end of this year, Amkor Corporation - a major player in the semiconductor industry based in Arizona (USA) - will put its new factory in Bac Ninh into operation. The initial investment for this project is $500 million.

Quanta Computer Group (Taiwan - China) has signed an agreement with the People's Committee of Nam Dinh province for the development of a large-scale computer production project. With an investment capital of about $120 million, Quanta Computer plans to build a factory specializing in manufacturing and processing laptops and desktop computers. This is Quanta's 9th factory globally, but the first one in Vietnam. Importantly, Quanta is a production partner of Apple's MacBook. Therefore, the presence of this corporation implies that Apple, the giant, is continuing its trend of shifting production to Vietnam.

During the "Singapore Business Forum" held for the first time in Hanoi, UOB Bank plans to further promote FDI inflows into Vietnam through the signing of a memorandum of understanding on expanded cooperation with the Foreign Investment Agency (Ministry of Planning and Investment).

According to a survey by the Japan External Trade Organization (JETRO), 60% of Japanese companies have plans to expand their investment in Vietnam. This rate is the highest in the ASEAN bloc. When these plans are realized, foreign investment in Vietnam will continue to increase.

In the Vietnam - South Korea Business Forum at the end of June 2023, within the framework of the official visit of South Korean President Yoon Suk Yeol to Vietnam, over 100 memoranda of understanding on cooperation were signed and exchanged between companies from both sides. Many Korean companies affirmed that they will continue to accompany Vietnam, considering it as a strategic territory and an important investment destination globally, with specific investment projects, especially in the context of international and global economic fluctuations.

As a result, many Korean companies will start or expand production projects in Vietnam, thanks to a series of free trade agreements and competitive labor costs. These activities open up expectations that Vietnam will attract more high-tech projects in the strategic "establishing an eagle's nest" sectors such as green energy, digital economy, healthcare, semiconductor chips, which demonstrate that Vietnam is still an attractive destination preferred by multinational corporations. In the economic outlook report for the second half of 2023 by Maybank Securities Joint Stock Company (MBKE), FDI is forecasted to reach $19-21 billion in 2023. Do Van Su, Deputy Director of the Foreign Investment Agency, also highly appreciates the prospects of attracting FDI in 2023, stating that FDI attraction in 2023 will not be low, even higher than the results of 2022, with disbursed capital reaching about $22-23 billion.

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