Foreign investment in Vietnam up, but growing competition looms

Vietnam, an attractive destination

According to the Ministry of Planning and Investment, as many as 1,738 new projects were registered around the country with total capital of US$15.2 billion, a 4.1 percent year-on-year increase. Regarding adjusted capital, some 985 projects registered for adjustment of investment capital, with total additional registered capital of more than US$9 billion, up 40.5 percent year-on-year.

Nguyen Thi Huong, director-general of the General Statistics Office of Vietnam, said total newly registered and adjusted capital increased strongly in 2021, reflecting growing investor confidence in Vietnam.

Capital contribution and share purchase by foreign investors totaled nearly US$6.9 billion in 3,797 transactions, recording decreases of 7.7 percent in value and 38.2 percent in volume. The decline was attributed to the prolonged social distancing, travel restrictions and quarantine policies, making it hard for foreign investors to come to Vietnam to survey projects. However, capital contribution and share purchase by foreign investors are forecast to thrive in 2022.

Foreign investment in 2021 targeted 18 sectors, of which the manufacturing and processing industry led with total investment capital of more than US$18.1 billion, accounting for 58.2 percent of registered investment capital. Electricity production and distribution ranked second with over US$5.7 billion, accounting for 18.3 percent, followed by real estate business, wholesale and retail with total registered capital of more than US$2.6 billion and over US$1.4 billion, respectively.

Among 106 countries and territories investing in Vietnam, Singapore led with over US$10.7 billion, accounting for 34.4 percent of the total, followed by the Republic of Korea with nearly US$5 billion and Japan with around US$3.9 billion.

Appropriate policies

According to the Foreign Investment Agency under the Ministry of Planning and Investment, positive results in drawing foreign direct investment (FDI) were attributed to appropriate government policies and specific solutions to overcome difficulties facing businesses, as well as adjustment for safe and flexible adaptation and effective control of Covid-19. In late 2021, many large corporations poured capital into Vietnam, such as a US$1 billion factory project by Denmark’s LEGO Group in the southern province of Binh Duong, and a US$1.6 billion project by Amkor Technology Inc. from the US in the northern province of Bac Ninh.

Economists say Vietnam continues to be an attractive destination in the eyes of foreign investors thanks to its favorable geographical location, high-quality workforce and special investment incentives. However, investor confidence in the global value chain remains shaky due to the complicated developments of the Covid-19 pandemic, while competition in FDI attraction among countries is increasing, especially for emerging and developing economies.