Vietnam maintains its position as an investment hotspot

Improved position

The latest survey results of the European Chamber of Commerce (EuroCham) show that Vietnam's investment hotspot position has improved significantly in the last months of 2023.

Nearly two-thirds of respondents ranked Vietnam as one of the top 10 global investment destinations, with about one in six ranking in first place.

EuroCham's survey also highlights Vietnam's strategic position in the ASEAN region. While only a small portion considered Vietnam an "industry leader", nearly a third of respondents ranked Vietnam among the "top competitive countries" in the region.

Most consider Vietnam a strong competitor although certain challenges remain. This perspective emphasizes Vietnam's growing influence and potential for further development in ASEAN.

At the forum "Vietnam Economic Scenario 2024", Mr. Ahmed Yeganeh, HSBC's National Director of Corporate Banking Services, assessed that economic growth led by FDI allows Vietnam to benefit more than other countries. The country has attracted investment in key industries by becoming a global production base for electronics.

It can be seen that Vietnam has made many achievements compared to the year 2000 when electronics exports only accounted for 5% of total exports. Currently, it makes up more than 30%.

In the latest report, HSBC emphasized that Vietnam is known to be one of the countries benefiting from US-China trade tensions (the trend will continue).

Both total FDI and new FDI in 2023 were close to historical highs. In particular, new FDI investment has increased to its highest level in four years, reaching about 5% of GDP.

Notably, new FDI poured into production has increased to a new high of over 15 billion USD. This result continues to strengthen Vietnam's leading position in ASEAN, just behind Malaysia.

In addition, China, Taiwan, Hong Kong, and Macau account for nearly half of Vietnam's new FDI capital in 2023.

It is not surprising that most of the capital is poured into electronics - a field in which Vietnam is quickly becoming a rising star. This is also a field where FDI flows are more diverse, showing Vietnam's increasingly important role in the global supply chain.

In addition to electronics, investors are also increasingly attracted to Vietnam's promising consumer market - a trend that Japanese corporations have anticipated early on.

Factors contributing to the increase in FDI

Mr. Michael Kokalari, Director of VinaCapital's Macroeconomic Analysis and Market Research Department, in his latest assessment, said that Vietnam's attractiveness in the eyes of foreign investors comes from three factors.

Firstly, Vietnam's labor costs are less than half of China's but the labor quality is equivalent, according to surveys by JETRO and other units.

Second, Vietnam is geographically located near Asia's high-tech supply chains.

Third, Vietnam is in the "friendshoring" group with little risk of tax imposition when exporting to the US. Friendshoring can be understood as rerouting supply chains to countries considered politically and economically safe or low risk to avoid business disruption.

The position of attracting FDI and the quality of capital flows into Vietnam has been improved thanks to important advances in the past year. For example, Vietnam and the US have upgraded relations; Vietnam was the only country that was visited by top leaders of both China and the US in 2023.

According to VinaCapital experts, these things show Vietnam's special position on the world geopolitical chessboard at the present time.

This will benefit investors because multinational corporations with production facilities in Vietnam will not have to worry about not being able to sell products to the US or not being able to buy raw materials for production from China, due to the fact that these two countries both want to connect with Vietnam.

The IMF, Atlantic Council and others have also pointed out that geopolitical factors are becoming increasingly important when countries make investment decisions.

Not only that, Apple has announced that it will move research and development activities to Vietnam for the first time, after deciding to produce Apple Watch in Vietnam in 2022.

The move from assembling products to designing those products shows that this group is improving the quality of their activities in Vietnam.

The strongest driving growth for a country like Vietnam is the increase in technological content and complexity in products and services.

According to VinaCapital, Apple's new step is aimed at developing the semiconductor industry in Vietnam - which is a topic much discussed by leaders of large corporations from the US and Taiwan such as Nvidia.

Source: Eurocharm, HSBC

Compiled by VBI