Foreign Direct Investment in Vietnam

June 29, 2010Vietnamby EconomyWatch


Buoyed by its recent successes on the diplomatic front investment planners in Vietnam have predicted a huge wave of capital inflow in the form of foreign direct investment into the country in 2008. As per the results of a survey, Vietnam was the third popular investment destination in Asia in the 2007 to 2009 time frame. China has been the leader followed by India in the second place.

FDI facts for Vietnam in 2005

In 2005 Vietnam clinched FDI to the tune of 5.8 billion US dollars. It was the highest attained figure in comparison to the last 8 years. Out of this total investment around 4 billion US dollars came from some 771 FDI projects, which were then newly licensed. The rest of the invested amount was accounted for by the additional investments, which had been pumped into the existing investment projects.

2005 proved to be a golden year for the foreign entrepreneurs operating in Vietnam. They recorded revenue of 20 billion US dollars. This was the highest figure since 1997, the year of the Asian monetary crisis.

The Vietnamese government engaged itself in a relentless pursuit to perfect its legal framework. It dished out incentives for the foreign investors. It also tried wholeheartedly to fulfill the commitments made before the international community. All these went in building and consolidating the foreign investor's confidence in the economy.

Vietnam succeeded in maintaining a stable socio-political situation. Apart from this Vietnam’s investment promotion activities were professionalized. Years of careful observation, policy formulation and implementation in tune with international and domestic market conditions enabled Vietnam to record a voluminous FDI flow in 2005.
Foreign Direct Investment in Vietnam in 2007 and 2008

In 2007 Vietnam attracted FDI pledges worth over $20 billion. It was a 70% increment over comparable 2006 figures. Around 1,500 new investment projects were licensed in 2007. The areas in focus were as follows:

  • Construction
  • High-tech areas
  • Production of electronics
  • Telecommunications

    Labor costs are substantially low in Vietnam. The workforce is also primarily young and highly literate. This has turned Vietnam into a popular Asian manufacturing hub.

    As per January 2008 reports, FDI projects numbering 40 and worth $50 billion are on the anvil in Vietnam and they are awaiting for approval from the government. These new investment projects covered the thrust areas of the Vietnamese government. The areas included were as follows.

  • Electricity
  • High-value manufacturing.
  • Electrical part production
  • Steel manufacturing.
  • High technology
  • Entertainment complex development
  • Seaport construction
  • Hotel development
  • Transport infrastructure
  • Urban development

    It may be noted that, large foreign corporations and multinationals are showing active investment interest in Vietnam of late.

    Below is provided data on some recent estimates of FDI inflow into Vietnam for the time period ranging from January 2008 to March 2008. The money amount are presented in million $US.

    The province of Hanoi recorded 37 investment projects with an invested capital of 530 million $US. The comparable figures for Bac Ninh are 4 and 95. For Hai Duong they were 9 and 82.7 respectively. Thua Thien Hue bagged 1 project with an invested capital of 298.4 million $US.

    However, some analysts have voiced skepticism regarding Vietnam's absorption capability of the FDIs, it has garnered. As per estimates in 2006, 60% of the registered FDI in Vietnam was not used. FDI experts observe that FDI implementation is a tad slow in Vietnam. Some of the factors that are being attributed for this phenomenon are stated below:

  • Inadequate infrastructure
  • Management problems
  • Shortage of adequately trained human resource

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