Invest in Vietnam
July 28, 2023

Attracting investment in Vietnam: What are the necessary initiatives for 2H2023?

In the first 7 months of 2023, foreign investment capital in Vietnam reached nearly 16.24 billion USD, showcasing a remarkable increase of 4.5% over the same period in 2022. This surge in foreign investment signifies growing confidence in the opportunities to invest in Vietnam, marking an 8.8 percentage point improvement compared to the first 6 months of the year.

Foreign investment situation in Vietnam in the first 6 months of 2023

Attracting foreign direct investment (FDI) inflows in Vietnam in the first months of 2023 faces many difficulties in the general context of the world economy: Political conflicts in some countries around the world are increasingly acrimonious; Price pressure and inflation show signs of cooling down but remain at high levels; Global demand for goods tends to decrease and shows no signs of recovery; Global financial conditions tend to tighten, with a stronger impact on international businesses, trade and investment; risks of the banking system; Supply chain disruptions have not been completely resolved.
Statistics from the Foreign Investment Department, Ministry of Planning and Investment, show that as of July 20, 2023, the total newly granted investment capital, adjustments and capital contributions, share purchases, and capital contributions from investors looking to invest in Vietnam reached nearly 16.24 billion USD. This figure represents a notable increase of 4.5% over the same period in 2022, demonstrating the growing attractiveness of opportunities to invest in Vietnam. Moreover, it marks an impressive 8.8 percentage point improvement compared to the first 6 months of the year. In July 2023 alone, total foreign investment capital registered in Vietnam reached more than 2.8 billion USD, an increase of 8.9% compared to June 2023; an increase of 41.9% compared to May 2023 and an increase of 85.7% compared to the same period in July 2022.
In addition, there were 736 times of projects registered for adjustment of investment capital, with the total additional capital reaching nearly 4.16 billion USD, up 27.1% in number of projects but down 42.5% in capital compared to the previous year. same period. In addition, there were 1,627 transactions of capital contribution and share purchase by foreign investors, with a total value of capital contribution of 4.14 billion USD, down 10.6% in number but increasing by 60.7% in capital when compared to the same period.
Also according to the Foreign Investment Agency, in the first 7 months of the year, adjusted investment capital into Vietnam still decreased compared to the same period last year (down 42.5%), but the decrease tends to improve month by month compared to the same period last year. with the first months of the year. Specifically, adjusted investment capital in the first 7 months decreased by 42.5% over the same period, lower than the decrease of 57.1% in 6 months; a decrease of 59.4% in 5 months; a decrease of 68.6% in 4 months; a decrease of 70.3% in 3 months and a decrease of 85.2% in the first 2 months of 2023

The trend of outward investment shows signs of slowing down even though the Covid-19 pandemic has been controlled, many major economies tend to encourage and bring FDI back to the country. In addition, the competition to attract investment capital in Vietnam as well as among other countries in the region has gradually "heated up" with many new policies to compete for shifting investment capital flows. Investors  seem to be hesitant to invest in Vietnam amidst the current economic uncertainties. These factors are exerting pressure, significantly reducing global FDI inflows, negatively affecting outward investment flows of major economies, including investment partners in Vietnam, leading to a decrease in foreign investment attraction into Vietnam in the first months of 2023 compared to the same period last year.

Rate of increase/decrease in foreign investment capital in Vietnam as of the 20th of every month in 2023 compared to the same period last year

Although from the beginning of the year until now, investment capital flows into Vietnam are still in a downward trend compared to the same period last year, but a positive sign is that the decrease is increasingly narrowing. In particular, registered foreign investment capital in 7 months has had a positive growth rate.
Total foreign investment capital in Vietnam (FDI) as of July 20, 2023 includes: Newly registered capital, adjusted registered capital and value of capital contribution and share purchase of foreign investors reaching 16.24 billion USD, up 4.5% over the same period last year.

Foreign capital invested in Vietnam as of July 20, 2019-2023 (Billion USD)

Total registered FDI capital in the first 7 months of 2023 has improved a lot compared to the decrease of 7.1% in the same period of 2022, shown by the following positive signals:

Newly registered capital has 1,627 projects with a capital of 7.94 billion USD, (accounting for 48.9% of total registered capital), an increase of 75.5% in the number of projects and an increase of 38.6% in registered capital when compared to the same period last year. Registered capital contribution and share purchase by foreign investors with a total capital contribution value of 4.14 billion USD (accounting for 25.5% of total registered capital), a sharp increase of 60.7%. This detailed increase and decrease confirms foreign investors' confidence in stable macroeconomic policies and a safe investment environment in Vietnam, thus still attracting foreign investors to decide to come to Vietnam to invest and expand existing projects in Vietnam.
The growth rate in the number of new projects (up 75.5%) is greater than the growth rate in total new investment capital (up 38.6%), showing that: investors in Vietnam with small and medium scale continue to be interested in focus, trust in Vietnam's investment environment and make new investment decisions; Large corporations are currently cautious and carefully considering continuing to invest in Vietnam in the context of the impact of the global minimum tax policy taking effect from 2024.

New investment projects still focus on provinces and cities that have many advantages in attracting foreign capital to invest in Vietnam (good infrastructure, stable human resources, efforts to reform administrative procedures and active in investment promotion,…) such as Hanoi, Ho Chi Minh City. Ho Chi Minh City, Bac Giang, Binh Duong, Hai Phong, Bac Ninh, Dong Nai,…
Investors in Vietnam come from Asia, traditional investment partners still account for a large proportion (Singapore, Japan, China, Korea, Hong Kong Special Administrative Region (China) , Taiwan). These six partners alone accounted for 78.2% of the country's total registered FDI in the first seven months of 2023.

Solutions to attract FDI

To attract quality FDI inflows in the coming time in the context of countries' overseas investment trends showing signs of slowing down, Vietnam needs to implement many effective solutions, specifically as follows:
Review, supplement and improve institutions, continue to substantially reduce business conditions that are barriers to production and business activities; Promote administrative reform, effectively implement one-stop procedures to create a favorable business environment for businesses to establish and develop; Review and amend preferential policy mechanisms to attract foreign investment in the context of applying global minimum tax. Improve the quality of labor resources, as well as need to develop synchronous transportation infrastructure connecting provinces and economic regions to create favorable conditions for attracting investors to Vietnam.

Pay attention to meeting the requirements of transnational corporations in terms of negotiation time, signing agreements and implementation; Prioritize strategic investors; create a global production chain. Establish a mechanism for prioritizing high-tech enterprises and facilitating technology transfer to domestic businesses. Domestic businesses need to make efforts to improve their capacity: technological capacity, labor quality, management, etc. This is an opportunity for businesses investing in Vietnam to place orders and support domestic businesses perfecting their production process, increasing linkage opportunities.
Focus on perfecting investment institutions in the direction of creating favorable conditions for foreign investors to enter Vietnam, research and promulgate appropriate policies for each industry and each field to attract quality FDI capital flows. It is necessary to completely eliminate unofficial costs because this is a bottleneck that hinders the flow of investment capital not only for FDI enterprises but also for domestic private enterprises.

Review all industrial parks (IPs): priority should be given to industrial parks for expansion and new construction, while industrial parks need to be reduced in number. Announcing a list of industrial parks with clean land funds, ready infrastructure, etc. to attract investment in Vietnam; Promote synchronous infrastructure investment, smooth traffic connections between provinces/cities and regions/regions, creating favorable conditions for attracting investment and developing production and business activities.

Proactively deploy investment promotion campaigns, affirming Vietnam as a safe and reliable investment destination. Proactively connect and work with large corporations in the world to exchange and share Vietnam  investment opportunities. By doing so, we can effectively showcase the country's potential and create a favorable environment for investors looking to invest in Vietnam.
Focus on policy dialogue and take timely measures to remove difficulties for FDI enterprises, especially regarding administrative and land procedures. Strengthen coordination with business associations, industries, and foreign business associations.

To increase investment attraction, Vietnam needs to prepare necessary conditions such as reviewing and supplementing clean land funds; review the electricity planning; training high-quality human resources; additional policies to develop supporting industries; develop regulations and standards as a new filter to select FDI investors with advanced technology and the ability to withstand external pressure for sustainable development and ensure national security.
Proactively monitor and evaluate the trend of shifting foreign capital investment flows into Vietnam to make appropriate policy adjustments in attracting quality FDI capital flows.
The Government has appropriate policies to promote the process of deploying FDI capital. Developing high-quality human resources, as well as strongly reforming administrative procedures, create favorable conditions for investors to invest in Vietnam.

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