A new wave of foreign investments in the making

Vietnam was seeing a new wave of foreign investment, fuelled by an improved investment climate, upgraded infrastructure system, high-quality human resources, and leveraged diplomatic relations with major economies.

Nikkei Asia recently wrote that a fourth boom of foreign investment in Vietnam might be in the making, led by the capital influx from the US after US President Joe Biden’s visit to Vietnam last month.

Following the meeting between President Biden and General Party Secretary Nguyen Phuc Trong, Vietnam and the US announced the establishment of a comprehensive strategic partnership.

After Biden’s visit, Vietnamese Prime Minister Pham Minh Chinh held a 6-day visit to the US, during which Chinh visited the headquarters of Nvidia in San Francisco, calling on the chipmaking giant to establish a production base in Vietnam.

Chinh also worked with leading corporations of the US, including Microsoft, Meta, SpaceX, Coca-Cola, and Pacifico Energy, to promote investments in prioritised sectors such as manufacturing, technology, renewable energy, aviation, and innovation, as Vietnam was aiming to pivot from its traditional labour-intensive industries.

According to Nikkei’s analysis, Vietnam witnessed three significant booms in foreign capital influx. The first boom occurred in 1997 when Japan’s Honda Motor began local two-wheeler production, 10 years after Vietnam passed the Law on Foreign Investment.

The second boom spanned the period from the early 2000s up to the time around the global financial crisis in 2008 with a notable investment of South Korea’s Samsung Electronics in a mobile phone production base in Bac Ninh. The third was believed to have come into full swing in the mid-2010s.

“Now Biden's visit may trigger a surge in American investment in Vietnam… Biden's diplomatic move may be interpreted by American businesses as a green light to invest in Vietnam,” Nikkei wrote.

In late March, more than 50 US enterprises, led by the US–ASEAN Business Council, visited Vietnam to study and seek investment and business cooperation opportunities.

On Wednesday last week, the US-headquartered Amkor Technology, a global leader in the outsourced semiconductor assembly and test industry, which also operates in the Republic of Korea, opened a $1.6 billion semiconductor manufacturing plant covering 23 hectares in Bac Ninh Province.

Receiving Vice President and CEO of Amkor Technology Ji Rong-rip on Thursday, Chinh said that Vietnam wanted to advance its position in the global semiconductor supply chain, adding that the country would step up the training of a high-quality workforce in the semiconductor industry with the goal of training 100,000 workers by 2030.

Many chip giants, like US-based Intel, also poured investments into Vietnam. The Republic of Korea’s Samsung also planned to make semiconductor parts in Việt Nam.

Statistics from the Ministry of Planning and Investment showed that the US’ FDI influx into Vietnam totalled more than US$11.8 billion in 1,301 projects, made the US the fourth-largest in Vietnam. Still, US investment in Vietnam remained modest compared to the Republic of Korea – the largest investor with a total registered capital of nearly $83 billion, Singapore – the second with $73 billion, and Japan – the third with $71.3 billion.

Rising star

Vietnam was also an attractive destination for investment not only from the US but also from other countries around the world, driven by the country’s improved investment climate, infrastructure system, human resources, and rapid international integration.

The Danish company LEGO started the construction of a production base worth over $1 billion in the southern province of Bình Dương.

A recent quarterly Business Confidence Index (BCI) of the European Chamber of Commerce (EuroCham) found that 63 per cent of surveyed businesses positioned Vietnam within their top 10 FDI destinations, demonstrating that Việt NamVietnam’s global investment appeal remained strong.

Notably, 31 per cent placed Việt NamVietnam among their top three, while an impressive 16 per cent hailed it as their foremost investment destination.

The survey also found that over half planned to increase their investment in Vietnam by the end of this year.

The ministry’s updates showed that Vietnam attracted nearly $20.21 billion FDI in the first nine months of this year, an increase of 7.7 per cent over the same period last year. The disbursed capital was estimated at $15.91 billion, a rise of 2.2 per cent.

Nguyen Th Huong, Director of the General Statistics Department, said that the FDI influx created an important growth driver for the Vietnamese economy this year and in following years.

Huong said that Vietnam’s global investment appeal came from the stable macroeconomy, improved investment climate, and the Government’s support to enterprises.

According to Vu Minh Khuong from the Lee Kuan Yew School of Public Policy (Singapore), the confidence in the ability of Vietnam to become a developed industrial country by 2045 has increased significantly, both externally and internally.

“Vietnam seems to be standing at the threshold of an era in which the country could take off to become a developed country,” he stressed.

In the report ASEAN Perspectives released in September, HSBC assessed that despite severe trade challenges, Vietnam continued to be on the frontline to receive quality FDI.

HSBC’s report pointed out that Vietnam was turning itself into a rising star in the global manufacturing supply chain. “While much of the investment initially entered the lower value-add textile and footwear space, Vietnam has quickly climbed up the value chain, growing into a key hub for electronics assembly,” the report wrote.

According to Tran Dinh Thien, former Director of the Vietnam Institute of Economics, global investment appeal arose to be an advantage of Vietnam in the fluctuating world.

The new period was opening unprecedented opportunities for Vietnam in attracting FDI, which could create an immense growth driver and breakthrough development, Thien said, adding that the important factors were institutional reforms, smart governance, connected infrastructure, and high-quality human resources, especially a community of local enterprises with the capacity to engage in the global value chains.

Nguyen Dinh Cung, former Director of the Central Institute for Economic Management, said that domestic enterprises also needed to improve their competitiveness to be able to join with international corporations and play key roles in the global value chains.

Source: VNS