Global foreign direct investment (FDI) flows in 2021 were USD 1.58 trillion, up 64 per cent from the exceptionally low level in 2020. The recovery showed significant rebound momentum, with booming merger and acquisition (M&A) markets and rapid growth in international project finance because of loose financing conditions and major infrastructure stimulus packages. However, the global environment for international business and cross-border investment changed dramatically in 2022. The war in Ukraine – on top of the lingering effects of the pandemic – is causing a triple food, fuel and finance crisis in many countries around the world. Investor uncertainty has put significant downward pressure on global FDI in 2022, and new investment project numbers, including greenfield announcements, international project finance (IPF) deals, and cross-border mergers and acquisitions, all shifted in reverse after the first quarter of 2022 to start declining. Cross-border M&A sales were 6% lower and IPF values more than 30% lower in 2022. The outlook for global FDI in 2023 appears weak, with a significant number of economies around the world expected to enter a recession. Negative or slow growth in many economies, further deteriorating financing conditions, investor uncertainty in the face of multiple crises and, especially in developing countries, increasing risks associated with debt levels will put significant downward pressure on FDI (UNCTAD Global Investment Trends Monitor, January 2023). The negative trend reflects a shift in investor sentiment due to the food, fuel and finance crises around the world, the Ukraine war, rising inflation and interest rates, and fears of a coming recession.
Vietnam's FDI inflows in 2021 amounted to USD 15.66 billion, unchanged from the previous year (15.80), while the total stock of FDI reached USD 192.57 billion in 2021, according to the UNCTAD's 2022 World Investment Report. FDI was therefore not affected by the global economic crisis triggered by the Covid-19 pandemic. While there were significant contractions in investment in manufacturing and real estate (the two largest recipients last year), an increase in investment in electricity projects offset FDI inflows. In 2020, the most important projects in Vietnam include a USD 5 billion gas-fired power plant proposed by ExxonMobil (USA) and a USD 2.2 billion coal-fired power plant developed by Thai multinationals in the Quang Tri economic zone. Traditionally directed towards the light industry, FDI inflows quickly turn towards heavy industry, real estate and tourism. Inflows are expected to continue, confirming the country's position as one of the most attractive countries in terms of FDI in Asia. The main investor countries are Japan, South Korea and Singapore, with the manufacturing and processing sectors attracting the most FDI followed by real estate and professional activities/science/technology (Trading Economics). However, inflows from major Asian economies (e.g. China, Hong Kong (China), Japan, Republic of Korea), traditionally the largest sources of FDI in Vietnam, declined in 2020 and 2021.
The country has made some progress on the ease of doing business, particularly with regards to paying taxes. Vietnam expects disbursed foreign direct investment to continue to rise as the government steps up efforts to attract factories into the country. There are 19 key sectors attracting FDI inflows. Among them, the processing and manufacturing sector accounted for the highest proportion with $13.6 billion, accounting for 47.7 per cent of total investment capital. Electricity production and distribution ranked second with investment capital of over 5.1 billion USD, accounting for 18% of the total registered investment capital. It is followed by real estate, wholesale and retail with the total registered capital of nearly 4.2 billion and 1.6 billion. The Ministry of Planning and Investment aims to draw more FDI into areas including export-oriented, energy and high-technology by building a more business-friendly environment.
Foreign Direct Investment (FDI) increased by 4.3 billion USD in September 2022 (CEIC Data, 2023). According to the Foreign Investment Agency under the Ministry of Planning and Investment (MPI), Vietnam is likely to attract 36 to 38 billion USD in foreign direct investment (FDI) in 2023. The figure was nearly 22.4 billion USD in 2022.
|Foreign Direct Investment||2020||2021||2022|
|FDI Inward Flow (million USD)||15,800||15,660||17,900|
|FDI Stock (million USD)||176,911||192,571||210,471|
|Number of Greenfield Investments*||134||128||181|
|Value of Greenfield Investments (million USD)||10,957||11,785||25,916|
Source: UNCTAD - Latest available data.
Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.
The main strengths of the country's economy are:
The main obstacles to the development of the country are:
The promotion of foreign investments is part of Vietnam's development strategy. To that end, the government is improving its judicial system, creating more incentives and taxation policies for foreign investors and trying to respect its commitments with regard to the international community. "Business Forums", opportunities for foreign investors to establish fruitful dialogue and to assert their interests, are frequently organised between the Vietnamese government and the private sector. Additionally, Vietnamese efforts to maintain socio-political stability and set up and professionalise investment promotion activities also play a crucial role in increasing the FDI flow. Recent moves to diversify the economy and shift to high value-added industries also demonstrate the country's desire to attract new types of FDI.
In 2019, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) went into effect, and Vietnamese officials approved the EU-Vietnam Free Trade Agreement (EVFTA) in late 2020. Such agreements ease FDI inflows into the country, offer better market entry for Vietnamese exports, and promote reforms that assist all foreign investors.
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Latest Update: September 2023