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Apr 04, 2022 / 16:31

Vietnam’s selective FDI attraction strategy yields early results

The amount of FDI capital pouring into fields of high environmental risks, obsolete technologies or labor-intensive industries has been on the decline.

Vietnam’s new FDI attraction strategy towards greater quality rather than quantity has started yielding positive results.

 Electronics production at YPE Vina at Binh Xuyen 2 Industrial Park, Vinh Phuc Province. Photo: Hoang Hung

During the first three months of 2022, the total foreign investment capital in Vietnam declined by 12% year on year to US$8.91 billion. However, the number of fresh projects rose by 37.6%, and that of ongoing projects being injected with additional capital increased by  41.6%.

Deputy Director of the General Statistics Office (GSO)’s Industrial Production and Construction Statistics Department Phi Thi Huong Nga noted such a trend is proof of foreign investors’ confidence in Vietnam as a safe and attractive business environment, especially when the country has effectively contained the pandemic and pushing for economic recovery in the new normal.

Regarding a decline in the total FDI commitments during the January-March period, Nga pointed to two large-scale projects with a combined registered capital of $4.41 billion being registered in the same period of last year, making it the period with an unusual uptick in FDI attraction.

“If excluding these two projects, the new investment capital in the first quarter of 2022 would have risen by 14.2% year-on-year,” Nga added.

In addition, a report from the Foreign Investment Agency (FIA) under the Ministry of Planning and Investment highlighted the record high of foreign capital disbursement at $4.42 billion during the period, up 7.8% year-on-year.

“This remains the highest disbursed amount in the past five years,” it added.

Meanwhile, the FIA pointed out that the number of new micro and small-size projects is on the decline.

“Vietnam’s FDI strategy has become more selective with a focus on greater quality, rather than those of small size with low added-value,” stated the agency.

The amount of FDI capital pouring into fields of high environmental risks, obsolete technologies or labor-intensive industries has been falling. On the contrary, there has been a stronger rebound in the number of projects of high tech, environmentally friendly, and using green energy.

A highlight in FDI attraction in the first three months was the billion-dollar project from LEGO to build a carbon-neutral manufacturing plant in the Vietnam-Singapore Industrial Park (VSIP), the company’s first of its kind in the country.

The FIA added that around 228 existing projects were subject to expansion in the three months, up 41.6% year-on-year for $4.06 billion, showcasing the confidence of foreign businesses in Vietnam’s business environment.

More to come in the future

Vice Director of Savills Vietnam John Campbell expected Vietnam’s reopening policy and the Government’s active support for investors have laid the foundation for a promising future.

Vietnam continues to be a safe and attractive investment destination for foreign investors, he said.

For the past years, the country has been focusing on upgrading infrastructure systems, including industrial parks and thousands of kilometers of expressways to boost socio-economic development across the country.

During the first quarter, investors have poured money into 18 out of 21 fields and sectors, in which manufacturing and processing led the pack with investment capital of over $5 billion, accounting for 59.5% of total registered capital.

Real estate came second with $2.7 billion, or 30.3% of the total, including Gaw NP Industrial's multi-billion dollar projects to build a prefabricated factory (RBF)  covering 16 hectares at the GNP Yen Binh 2 Industrial Center, or a large-scale project at the Phu An Thanh Industrial Park in Long An Province.

Given the promising start, Minister of Planning and Investment Nguyen Chi Dung expected a bright prospect for Vietnam’s FDI inflows in 2022 and subsequent years.

“More large-scale and high-quality projects from multinationals would continue to come to Vietnam,” Dung said.

According to Vice Chairman of the Vietnam Association of Foreign Invested Enterprises (VAFIE) Nguyen Van Toan, multinationals have been focusing on restructuring operations and their global supply chains. "In this context, Vietnam could take advantage of its favorable geographical locations, business environment, and the constantly-improving infrastructure system to attract foreign investors."