US Direct Investment in Vietnam Set to Surge

14:16 | 21/12/2015 Economy

Direct investment in Vietnam by U.S. investors is poised to increase sharply in a near future as the country stands out from other regional peers, according to the Ministry of Planning and Investment.

US Direct Investment in Vietnam Set to Surge

Vietnam's IT and petroleum industries have been attractive to U.S. investors

Low labor cost will continue to be a driver for the imminent surge in U.S. foreign direct investment (FDI) in the Southeast Asian country, said the Foreign Investment Agency (FIA) under the Ministry of Planning and Investment.

Rising labor cost in China has prompted American transnational companies to shift their manufacturing bases to other countries having cheaper costs such as Vietnam, the agency said.

For example, Microsoft has been moving its smartphone production plant from China to Vietnam since 2014, making Vietnam a key point in the giant’s global supply chain. Other U.S. companies such as Intel, Jabil and Microchip are following suit.

The U.S.-brokered Trans-Pacific Partnership (TPP) agreement, to which Vietnam is a party, has increased Vietnam’s allure to American investors.

Over 30 U.S. companies, affiliated to the American Chamber of Commerce in Singapore, earlier this year came to Vietnam to explore investment opportunities. In 2014, three U.S. business delegations that embraced Boeing, Apple, AIG and ExxonMobil toured Vietnam with the same purpose.

Adding to stable politics, well-controlled inflation and incentives, young demographics and consumers’ rising income will drive up U.S. investment in Vietnam, the FIA added.

Last but not least, Vietnam’s key sectors such as oil and gas, aviation, information technology and electricity are also strengths of American companies such as ExxonMobil, Chevron, Boeing, ADC - HAS Airport, Microsoft, Intel, Apple, HP, General Electric, General Atlantis and AES.

The agency pointed out a number of problems that dampen Vietnam’s economic growth and reduce allure to foreign investors. They are corruption, the weak government-business linkage, limitations of energy and transport infrastructure, the lack of skilled labor force, and rising input costs.

Data of the FIA showed that U.S. investors had 748 valid projects worth $11.08 billion in Vietnam as of the end of June 2015, enabling the U.S. to rank 7th among countries and territories investing in the country.

The hotel and restaurant sector has been the most attractive to U.S. investors when pulling $4.67 billion. The manufacturing and real estate industries followed with $2.2 billion and $2.1 billion, respectively.