Thammasat University students interested in ASEAN studies, Vietnam, business, economics, history, political science, and related subjects may find it useful to participate in a free 23 September Zoom webinar on Trade War Catalyst: Understanding Trends in Foreign Direct Investment in Vietnam.
The event, on Monday, 23 September 2024 at 9am Bangkok time, is presented by ISEAS – Yusof Ishak Institute, Singapore.
The TU Library collection includes some books about different aspects of foreign direct investment in Vietnam.
Students are welcome to register for the event at this link:
https://us06web.zoom.us/webinar/register/5017252461130/WN_CCrWSMjQQFClV4lFLpCiLA#/registration
The event website explains:
About the Webinar
As strategic rivalry and trade tensions between the United States and China continue to reshape global supply chains, Vietnam’s industrial and manufacturing sector is undergoing a major transformation. At the same time, this has positioned the country as a strategic alternative for multinational corporations seeking stable and cost-effective investment opportunities while reducing their exposure to geopolitical risks.
This webinar, co-organized by the Vietnam Studies Programme of the ISEAS – Yusof Ishak Institute and the Asia Competitiveness Institute at the Lee Kuan Yew School of Public Policy, will examine key trends in Vietnam’s foreign direct investment (FDI) landscape from 2014 to 2023. Focusing on the key sectors attracting significant investments and the main countries driving them, the session will look into how the US-China trade war has presented opportunities for Vietnam and discuss the challenges the country must overcome to capitalize on this momentum for its long-term economic development.
About the Speaker
Thi Hang Banh is a Research Fellow at the Asia Competitiveness Institute in the Lee Kuan Yew School of Public Policy, National University of Singapore. She specializes in international trade and applied econometrics, focusing on topics such as foreign competition, free trade agreements, foreign direct investment, and the Vietnam economy. […]
A posting on the website of Lloyds Bank noted:
Foreign direct investment (FDI) in Vietnam
FDI in Figures
Vietnam’s FDI inflows in 2022 amounted to USD 17.9 billion, up by 14.3% year-on-year and above their pre-pandemic level, while the total stock of FDI reached USD 210.4 billion (around 51.8% of the country’s GDP), according to the UNCTAD’s World Investment Report 2023. 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 General Statistics Office reported that Vietnam attracted around USD 36.6 billion in foreign investment in 2023, marking a 32.1% year-on-year increase. During the same year, foreign investors allocated funds to 18 out of 21 economic sectors in the country, with processing-manufacturing receiving USD 23.5 billion or 64.2% of the total FDI capital, a rise of 39.9% compared to the previous year. In 2023, foreign investments in Vietnam originated from 111 countries and regions, with Singapore leading the way with over USD 6.9 billion, constituting 18.6% of the total FDI inflow.
Vietnam has emerged as one of the fastest-growing and relatively stable economies in Asia in recent years. The country boasts several favorable business conditions, including a stable political system, a consistent track record of high economic and market growth, a plentiful workforce of young and skilled laborers, strategic proximity to East Asia’s top emerging economies, and a relatively open FDI environment. Its business-friendly policies distinguish it among its Southeast Asian counterparts and foster a robust inflow of foreign capital. Despite boasting a relatively high level of FDI net inflows as a percentage of GDP compared to its regional counterparts, Vietnam confronts notable challenges within its investment climate. These challenges encompass widespread corruption, the entrenched dominance of state-owned enterprises (SOEs) in specific sectors, regulatory uncertainty across key industries, a weak and opaque legal framework, inadequate enforcement of intellectual property rights, a scarcity of skilled labor, restrictive labor practices, and sluggish government decision-making processes. Moreover, with significant reliance on inputs from the People’s Republic of China, Vietnamese manufacturing faces vulnerabilities related to forced labor risks within supply chains, although both the government and industry are actively engaged in addressing these concerns. Foreign and domestic private entities enjoy the privilege to establish and possess business enterprises in Vietnam and participate in various legal remunerative activities in unregulated sectors. However, Vietnam imposes statutory restrictions on foreign investment, such as foreign ownership limits (FOLs) and joint partnership requirements, particularly in sectors like banking, network infrastructure services, non-infrastructure telecommunication services, transportation, energy, and defense. Recent regulations, implemented in March 2021, specify 25 business lines where foreign investment is prohibited and outline market access requirements for 59 other business lines. Although Vietnam’s Law on Investment stipulates equal treatment for foreign and domestic investors, foreign investors have voiced grievances regarding encountering additional obstacles in obtaining routine government approvals. Furthermore, the government maintains foreign ownership limits (FOLs) in industries deemed vital to national security. Vietnam ranks 46th among the 132 economies on the Global Innovation Index 2023 and 59th out of 184 countries on the latest Index of Economic Freedom.
Last year, on the website of the Australian Institute of International Affairs, a blog was posted:
Foreign Direct Investment in Vietnam 2023: Challenges are Yet to Come
Vietnam’s impressive growth has made it a destination for foreign direct investment. To move beyond the low-labour-cost development model, Vietnam will need to invest in stabilising the investment environment and ensuring multinational corporations stay for the long term.
Foreign direct investment (FDI) has played a crucial role in Vietnam’s economic development over the past few decades. According to the World Bank, recent FDI inflows into the country reached over US$16 billion in (2020) in nominal terms. Even when correcting for inflation, we can see this growth peaking, so far, in 2022. It seems that 2023 will be, once again, a record year.
In the first quarter of 2023, Vietnam’s FDI inflows reached US$10.13 billion, an 18.5 percent increase compared to the same period last year. The total newly registered capital in the first quarter of 2023 stands at US$5.45 billion. This has helped to sustain Vietnam’s impressive economic growth, which averaged 6.8 percent per year from 2016 to 2019, making it one of the fastest-growing economies in the region. In 2022, Vietnam ranked the third-largest destination for FDI inflows in Southeast Asia, after Singapore and Indonesia.
Nonetheless, if one looks at FDI as a share of the overall economic activity in terms of GDP, the picture is less impressive. Since the Global Financial Crisis in 2008, the FDI share of the GDP has been hovering around 5 percent. In other words, Vietnam’s ability to capture FDI has barely kept up with broader economic growth. On the bright side, this is substantially higher than what countries like Thailand, Indonesia or Malaysia are attracting. Now, as we enter the era of RCEP (Regional Comprehensive Economic Partnership), the largest trade zone ever created, Vietnam presents itself as an attractive destination for FDI which will allow countries like Japan, South Korea, China, and also Australia to easily set up manufacturing in the country. […]
In conclusion, Vietnam has scope to improve its FDI strategy, making it greener and stronger. While there are fears Vietnam may be caught in a wage inflation-FDI trap, several structural and policy changes could render these fears mute. For the time being, FDI will continue to be a key element of Vietnam’s remarkable growth story.
(All images courtesy of Wikimedia Commons)