Over the past 30 years, foreign direct investment (FDI) has played a crucial role in the socio-economic development of Vietnam, enhancing the position and reputation of Vietnam on the international stage. Particularly, in 2023, the FDI inflow reached a record high, marking the highest level in the past 5 years since 2019.
In general, the FDI investment market in Vietnam achieved remarkable milestones in 2023. According to data from the General Statistics Office, by December 20, 2023, the foreign direct investment reached an estimated 23.18 billion USD, showing a 3.5% increase compared to 2022.The foreign investors have ventured into 18 out of the total 21 national economic sectors. Among these, the manufacturing and processing industry stayed at the first rank, achieving a total investment capital of over 23.5 billion USD, constituting 64.2% of the total registered investment capital and witnessing a 39.9% increase compared to the previous year. The real estate business sector secures the second position with a total investment capital of nearly 4.67 billion USD. In addition, 2023 witnessed 111 countries and territories invested in Vietnam. Singapore led the way with a total investment capital of over 6.8 billion USD, accounting for 18.6% of the total investment in Vietnam and showing a 5.4% increase compared to the previous year. Japan followed in second place with nearly 6.57 billion USD, making up over 17.9% of the total investment, and experiencing a significant 37.3% growth from the previous year.
There are several competitive advantages that contributed to Vietnam's positive results in 2023. Firstly, Vietnam enjoys a favorable geographical position for trade with the world, acting both as a regional hub and a gateway for accessing economies in the western part of the Indochina Peninsula. Secondly, Vietnam has the advantage of an abundant and competitive labor force with high quality. According to Tuoi Tre Newspaper, regarding labor costs, which typically account for an average of 55% of total costs in countries, Vietnam is ranked as the fourth most cost-effective market after Cambodia, Myanmar, and the Philippines, with an average labor cost of 108.196 USD per month. Thirdly, foreign investors highly appreciate the stability in political and social aspects compared to other countries in the region, which significantly contributes to building strong trust among both domestic and international investors. Furthermore, according to Vietnam Biz, since 1991, the influx of FDI into Vietnam has rapidly increased due to the participation of many large corporations in industries such as PouChen and Feng Tay (Taiwan) in the footwear manufacturing sector, Honda (Japan) in motorcycle production, etc. Vietnam is also one of the world's workshops for the textile, garment, and leather industries. According to the report of the Vietnam Textile Group (Vinatex), despite the complex fluctuations in the global economy in 2023, Vinatex has still achieved production and business targets, with a consolidated revenue estimated at 19.535 trillion VND, reaching 108% of the plan, a 15% increase over the same period. The entry of foreign technology giants, such as Samsung, the largest FDI investor currently, demonstrates the attractiveness of this market.
However, to sustain and further develop these achievements in the context that other regional peers are racing to attract FDI, Vietnam needs to create a favorable business environment for investors. First and foremost, Vietnam needs to promptly review and adjust its foreign investment policies to align with and keep pace with the fluctuations and uncertainties of the global economy and changes in the FDI attraction strategies of countries worldwide. Concurrently, it should build competitive advantages in attracting foreign investment by improving investment conditions and establishing a transparent legal system. In addition, Vietnam also needs to continue enhancing the infrastructure of industrial zones, export processing zones, and economic zones nationwide, increasing connectivity in transportation between geographical regions, especially in industrial zones, to be ready for FDI projects. This should be accompanied by comprehensive infrastructure development, including transportation, electricity supply, water availability, and communication capabilities.
The year 2023 witnessed a number of Foreign Direct Investment (FDI) projects being invested in Vietnam, among which notable examples include projects such as FRASCOLD – S.P.A with the FRASCOLD Vietnam Limited Company project, having a total investment capital of 600 thousand USD; LG Innotek investing 1.5 billion USD in a factory in Hai Phong; JinKo Solar investing 1.5 billion USD in a high-tech optical-electric cell factory; and ECOVANCE investing 500 million USD in a high-tech organic material factory. These FDI projects registered in 2023 may be disbursed in 2024. Therefore, the prospects for attracting FDI in Vietnam in 2024 are expected to be very promising.
In conclusion, 2023 is a successful year with many records set in attracting foreign direct investment (FDI) and economic development. In that year, Vietnam achieved significant milestones in the development of processing, manufacturing, and export-oriented industries, particularly in textiles and electronics. Moreover, Vietnam has concentrated on the development of modern and high-tech industries such as automobiles, electronics, telecommunications, and renewable energy. Vietnam has successfully demonstrated its attractiveness and development potential to the world. However, to continue attracting more FDI investors in following years, Vietnam needs to create a favorable business environment for them by upgrading infrastructure, reviewing and adjusting its foreign investment policies.
D'Andrea & Partners Legal Counsel have authored innovative publications exploring a complete roadmap for doing investment and business in Vietnam, entitled the Invest in Vietnam Series, including a wide range of noteworthy topics for foreign investors and businesses ranging from essential legal matters and procedures for doing business in Vietnam to promising economic locations for FDI.
Invest in Vietnam Series are available at our offices, and in both printed and e-book formats on the online store of Amazon.
The above content is provided for informational purposes only. The provision of this article does not create an attorney-client relationship between D'Andrea & Partners and the reader and does not constitute legal advice. Legal advice must be tailored to the specific circumstances of each case, and the contents of this article are not a substitute for legal counsel.