Due to the ongoing advancement of institutions and the investment landscape, Vietnam maintains its impressive track record of drawing foreign direct investment (FDI) to invest in Vietnam. Expert analysis anticipates the imminent initiation of numerous multi-billion USD projects in Vietnam.

Overview of FDI prospects for foreign investors to invest in Vietnam

As indicated by the Foreign Investment Department within the Ministry of Planning and Investment, the enduring faith of foreigners invest in Vietnam's prospective growth remains a pivotal driver in facilitating the steady influx of capital into the nation. Consequently, following an initial three-month phase of pronounced decline, the sector dedicated to attracting foreign direct investment (FDI) has begun to exhibit encouraging signs of recovery over the subsequent four months.

Based on statistical data available until April 20, 2023, the cumulative sum of fresh registered capital, modified capital, and capital contributions for share acquisition and capital contribution purchases by foreign investors has nearly reached 8.88 billion USD, marking a 17.9% decline compared to the corresponding timeframe. Despite the ongoing decrease in attracted FDI during this period, the rate of decline has shown improvement in contrast to the initial three months of the year (which experienced a 38.8% decrease). Remarkably, even as adjusted investment capital continued its downward trend, there has been a resurgence in new investment capital and capital contributions for share purchases.

In particular, over the initial four months of the year, the following developments were noted: The issuance of investment certificates for 750 new projects, representing a substantial 65.2% increase compared to the corresponding period last year, with a cumulative registered capital surpassing 4.1 billion USD (reflecting an 11.1% rise compared to the same timeframe in the prior year). Additionally, there were 386 instances of projects adjusting their investment capital, indicating a 19.5% surge in comparison to the same period. These adjustments contributed nearly 1.66 billion USD in additional investment capital (a decrease of 68.6% year-on-year, yet an increase of 1.7 percentage points fr om the first three months of May and a notable 16.5 percentage points from the initial two months of the year). Moreover, foreign investors engaged in 1,044 transactions involving capital contribution and share acquisitions to invest in Vietnam, resulting in a combined contributed capital exceeding 3.1 billion USD (signifying a robust 70.4% increase compared to the same period last year).

Furthermore, in a late-April 2023 meeting with Binh Duong province leaders, Ms. Priyamvada Srivastava, General Director of Procter & Gamble Group (P&G) in Vietnam, conveyed P&G's intention to infuse approximately 100 million USD for the expansion of the production line at the Ben Cat factory. This strategic initiative will elevate P&G's total capital invest in Vietnam to $400 million, marking a significant upswing from the present $300 million figure. This underscores Vietnam's pivotal role within the group's investment strategy, with a dedicated emphasis on cutting-edge manufacturing within its global production network.

Following their initial investment in a factory located within Khai Quang Industrial Park in Ho Chi Minh City, Polaris Group has made the strategic decision to amplify their production endeavors by establishing a second facility specializing in engine assembly for motorcycles, cars, and vehicles. This forthcoming project is set to be executed at Ba Thien 2 Industrial Park in Binh Xuyen District, Vinh Phuc Province, involving a substantial total investment of 30 million USD. It is worth highlighting that Polaris Corporation holds a prestigious position among the top 500 largest enterprises in the United States and presently operates across 19 manufacturing plants globally.

In recent developments, a meeting convened between the Prime Minister and international investors witnessed German, Korean, and Japanese enterprises affirming their commitment to undertake fresh investment ventures to invest in Vietnam and scale up their existing investments throughout the current year, culminating in a collective investment capital of up to 3.7 billion USD. Particularly noteworthy is their selection of sectors, which are in alignment with Vietnam's primary focal points for foreign investment attraction, encompassing various sectors such as eco-friendly manufacturing, renewable energy, and the production of medical devices.

The rise in fresh investment funds following a minor dip in the initial quarter of the year can be traced back to the ongoing enthusiasm of international investors, encompassing both modest and medium-sized enterprises, towards the landscape of investing in Vietnam. Their decisions to engage in new investments stem from a belief in Vietnam's business milieu. This stands in juxtaposition to the cautious and meticulous approach taken in regard to larger-scale investments within Vietnam, particularly in view of the implications posed by the global minimum tax policy.

FDI invest in Vietnam in 7 months reached more than 16 billion USD

As of July 20, data from the Foreign Investment Agency (Ministry of Planning and Investment) reveals that the cumulative foreign direct investment (FDI) - encompassing newly registered, adjusted, and capital contributed for share purchases and capital contributions from foreign investors to invest in vietnam - has surged to approximately 16.24 billion USD, marking a notable 4.5% increase over the corresponding period. July 2023, in particular, witnessed a substantial inflow of registered foreign investment capital exceeding 2.8 billion USD, signifying an 8.9% upswing compared to June 2023, a remarkable 41.9% jump compared to May 2023, and an impressive 85.7% surge in contrast to the same interval in July 2022.

Regarding the evaluation of foreign investment trends in the preceding seven months, the Foreign Investment Agency highlighted a prominent aspect: realized capital amounting to 11.58 billion USD during this time-frame, experiencing a marginal uptick of 0.8% when juxtaposed with the analogous period in 2022. Remarkably, this interval marks the initial instance within the year wh ere total registered investment capital has achieved an expansion over the equivalent time-frame (a growth of 4.5%), following a succession of months marked by a decline in the initial half of the year.

Confidence rises again

The expansion rate of newly initiated projects surpasses that of the cumulative investment capital growth, underscoring the enduring interest and confidence of small and medium-sized foreign investors in Vietnam's investment landscape. As per insights from the Foreign Investment Agency, fresh investment ventures continue to center around provinces and cities boasting inherent strengths in attracting foreign capital, such as robust infrastructure, a dependable workforce, streamlined administrative procedures, and a proactive approach to investment promotion.

These aforementioned commitments, as assessed by experts, signal the sustained optimism of foreign investors invest in Vietnam market. According to EuroCham's report on the business investment climate released at the conclusion of the previous year, a multitude of challenges are predicted to arise from the outset of 2023.

However, ongoing endeavors aimed at fostering collaboration, supporting FDI enterprises, and enhancing the government's responsiveness in terms of investment policies continue to uphold the trust of global investors. Mr. Torben Minko, Vice President of the European Chamber of Commerce (EuroCham) in Vietnam, highlights that renewed confidence among European investors can be attributed to Vietnam's effective management of inflation, sustained macroeconomic stability, and the Government's dedicated efforts in monetary and fiscal policy control.

The survey regarding the overseas investment activities of Japanese enterprises throughout 2022, released by the Japan Trade Promotion Organization (JETRO) in mid-February, further underscores the favorable evaluation of Japanese investors regarding the evolution of investment prospects and business opportunities in Vietnam.

Approximately 60% of the surveyed enterprises have expressed their intentions to amplify their business operations within Vietnam over the forthcoming 1-2 years. This proportion secures the top position within the ASEAN region, trailing behind only India and Bangladesh on a global scale. According to the report, Japanese companies are inclined to extend their business reach due to the potential to augment revenue through market expansion, amplified exports, and the notably robust growth prospects within the Vietnamese economy.

The recently disclosed Provincial Competitiveness Index 2022 (PCI 2022), a collaboration between the Vietnam Confederation of Trade and Industry (VCCI) and the United States Agency for International Development Cooperation (USAID), further highlights that foreign direct investment (FDI) enterprises continue to appraise Vietnam's business environment with a more positive outlook to invest in Vietnam. The report indicates a substantial reduction in the burden of regulatory enforcement, resulting in an enhanced business environment as compared to previous evaluations.

In the context of the PCI 2022 survey, a notable shift has been observed among participating enterprises. The proportion of businesses dedicating over 5% of their management time to administrative procedures has experienced a considerable reduction, plummeting from 60.6% in 2021 to 49.3% in 2022. Furthermore, the trajectory of informal expenditure has continued its decline. Specifically, a mere 17.4% of enterprises found themselves in the position of making unofficial payments for inspection and oversight personnel in 2022, marking a significant decrease from the 25.4% recorded in 2021.

A series of huge investment deals were established one after another

VPBank's Capital Infusion Agreement

VPBank is on the verge of undertaking the most substantial equity transaction ever witnessed within the Vietnamese banking sector. This pivotal move promises to augment the financial offerings and cultivate a burgeoning portfolio of Japanese clientele through a strategic collaboration with the formidable institutional entity, SMBC.

In a recent development, Sumitomo Mitsui Banking Corporation (SMBC), a key subsidiary of Sumitomo Mitsui Financial Group (NYSE: SMFG), formally injected a substantial sum of $1.5 billion into VPBank. This significant investment establishes SMBC as a strategic partner for VPBank, etching a milestone as the largest merger and acquisition (M&A) deal ever realized within the annals of Vietnam's banking industry. Notably, this transformative investment propels VPBank to the status of the second-largest bank in terms of equity within the national financial framework, trailing only behind Vietcombank. In a preceding instance, a fellow member of SMFG, the consumer finance powerhouse SMBC, had embarked on a significant venture by investing $1.4 billion to secure shares of FeCredit, valuing the financial institution at $2.8 billion.

CapitaLand Engages in Discussions for Vinhomes Project Acquisition

In recent developments, reputable news agency Reuters has reported that CapitaLand Development, the real estate arm of CapitaLand Group based in Singapore, is presently engaged in negotiations for the acquisition of a segment of Vinhomes Joint Stock Company (stock code: VHM) – an integral component of the Vingroup conglomerate. According to sources cited by Reuters, the estimated worth of this potential transaction stands at a substantial 1.5 billion USD. To be more specific, CapitaLand Development is exploring the possibility of procuring a share in Vinhomes' Ocean Park 3 project, a sprawling resort-style urban development encompassing an expansive 294-hectare expanse situated in close proximity to Hanoi. Alternatively, the company is also contemplating involvement in another project situated north of Hai Phong City.

Despite prevailing challenges and fluctuations in pricing that give rise to demanding circumstances, the prevailing reality unmistakably highlights the continued vibrancy of the mergers and acquisitions (M&A) landscape, offering many opportunities to invest in Vietnam. This vigor is particularly pronounced in an economy renowned as Asia's premier destination for multinational corporations. The aforementioned transactions serve as resounding endorsements of trust and shared understanding, underscored by the unwavering determination to infuse "fresh capital" into the market. This commitment endures, even amid a mounting scarcity of capital, as evident from the foreign investment community's ongoing influx into Vietnam. This sentiment finds further resonance in the events of March when 52 CEOs from prominent US corporations, encompassing notable entities like SpaceX, Boeing, Meta, and Amazon, among others, articulated their aspirations to explore investment opportunities and business prospects within a market boasting a staggering population of 100 million individuals.

Ted Osius, President and CEO of the US-ASEAN Business Council, eloquently captured this sentiment by stating, "While the world grapples with economic deceleration, Vietnam emerges as a regional nucleus of growth. This is the very essence that enterprises seek."