Hanoi (VNA) – Since Vietnam’s Doi Moi (Renewal) reforms in 1986, the country has received substantial foreign direct investment (FDI) inflows, turning itself into a rising star in the global manufacturing supply chain, according to HSBC.
Garment and textile production at an FDI company in Vietnam (Photo: VietnamPlus)
In its report ASEAN Perspectives released on September 12, HSBC economists assessed that despite severe trade challenges, Vietnam continues to be on the frontline to receive quality FDI.
ASEAN attracted a record high of almost 17% of global FDI in 2022, nearly double the figure four years ago. This achievement is a clear reflection of ASEAN’s strong fundamentals, favourable demographics, and competitive supply chains.
However, it is worth noting that not everyone benefits to the same extent. Over 65% of the region’s FDI has poured into Singapore, equivalent to as much as 25% of its GDP on average partly due to its strategic position as a key financial centre.
Malaysia and Vietnam have gained substantial FDI. As an example, new FDI into Vietnam’s manufacturing sector so far this year is already more than in each of the past three years. Indonesia’s FDI has not yet picked up notably, but its industrial transformation is gathering investor attention.
Vietnam continues to be on the frontline of quality FDI (Photo: VietnamPlus)
Two obvious supply chains are benefitting the most: the tech industry and electronic vehicles (EV). Singapore, Malaysia, and Vietnam are three outperformers in the former, while Indonesia and Thailand are key beneficiaries in the latter. To see the power of FDI, Malaysia now has a 45% global market share in the semiconductor subsector. Outside of manufacturing, ASEAN’s financial services have gained momentum, but this is mostly geared toward Singapore.
When thinking of FDI and the benefits it can deliver, Vietnam naturally stands out. 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. Much of the success in tech is thanks to Samsung’s multi-year FDI roadmap in Vietnam. With an investment of 18 billion USD over the last two decades, half of Samsung’s global smartphone production is from Vietnam. This has also incentivised other tech giants, particularly Apple, to expand their operations.
HSBC headquarters (Photo: VietnamPlus)
Greenfield FDI rose 40% year-on-year in the first eight months of 2023, with manufacturing alone accounting for 85% of new FDI. Despite a trade downturn, the trend provides hope for Vietnam to see a strong rebound when the cycle turns.
Traditionally, intra-ASEAN, the US, and the EU have been early movers in investing in ASEAN. In the manufacturing space, ASEAN’s backbone of FDI has seen heavy influence from Japanese and Korean investors. The former has turned Thailand into a regional hub for automobiles, and the latter has transformed Vietnam into an emerging centre for consumer electronics.
Vietnam lured close to 18.15 billion USD in foreign direct investment (FDI) from the beginning of this year to August 20, up 8.2% year-on-year, according to the Foreign Investment Agency under the Ministry of Planning and Investment.
In the period, there were 1,924 newly-registered projects with a combined capital of 8.87 billion USD, up 69.5% and 38.6% compared to the same period last year, respectively.
Meanwhile, over 4.53 billion USD was added to 830 existing projects, down 39.7% and up 22.8% year-on-year, respectively.
The value of capital contribution and share purchase deals rose by 62.8% to 4.47 billion USD.
The manufacturing and processing sector led in FDI attraction, with close to 13 billion USD, followed by real estate with more than 1.76 billion USD./.
