Foreign Direct Investments in Vietnam – Have you heard of the ‘second China?’ This is a term that has been loosely used to refer to Vietnam. The country has been undergoing a significant transformation in all facets of the economy. The change has elevated the country’s status globally, making it an ideal location for foreign investors. However, many people have been wondering whether it is possible to invest in Vietnam for foreigners.
The answer is yes. Not so long ago, Vietnam had strict regulations, among other challenges that made it difficult for foreigners to invest. However, the government has revised most of these regulations in a bid to attract investors.
Foreign Direct Investments in Vietnam
Vietnam has been among the fastest-growing countries in the world. This has seen a surge in foreign direct invest (FDI) with the country recording $16.74 billion in the first five months of the year. Recently, the Vietnamese government-licensed around 1,363 new projects totaling to $6.46 billion. This was an increase of 38.7% compared to the same period last year. The surge in FDI has been a result of the US-China trade war.
Sources of Investment Diversifying
Asian countries have been the primary source of FDI in Vietnam. For example, Hong Kong invested $5.08 billion, making it the most significant investor. This accounted for 30.4% of the total foreign direct investment. Other countries to invest in Vietnam were Singapore, South Korea, China, and Japan. Apart from government investments, companies have also been making investments in Vietnam. For example, Samsung and Canon have invested in Vietnam due to several reasons such as low cost of doing and lenient tax regimes.
Top Sectors Receiving Foreign Direct Investments
Real estate has continued to receive massive foreign and domestic investments contributing to 7.5% of the total FDI made. This has been partially due to increased tourism activities and other projects. With multinationals continuing to invest in the country, the need for office space is on the rise, thus pushing the demand even further. Asian countries have been the major source of demand. Currently, the real estate sector in Vietnam is not showing any signs of slow down.
Manufacturing and Processing
The sector receives a total of $10.5 billion, which accounts for 72% of the total FDI made in the country. The government has earmarked the industry as the determinant in its goal of achieving socio-economic development. The sector has been boosted by the rising costs of operations in China. However, the industry is facing numerous challenges with space appearing to be limited in the well-developed locations.
Retail and Wholesale Sector
Vietnam’s growing middle-class has been the driving force within this industry. This will see the sector hit an all-time high $180 billion by next year. The performance within the industry has seen companies increase their operations.
Factors Contributing to Foreign Direct Investments
Not so long ago, Vietnam was characterized by retrogressive regulations that hindered FDI. However, in recent years, the government has revised some of these regulations to make it possible for foreigners to invest. For example, the government introduced favorable tax regimes for companies investing in some regions of the country. Also, the country has relaxed its regulations on import and export making it easier to do business.
Growing Talent that Matches Demand
The country’s growing population means it has offered an alternative for cheap labor. This capped with low business costs has made the country popular among the investors and of curse for foreign direct investments. Vietnam has the highest literacy-levels among its peers in Southeast Asia, giving it an upper hand in attracting investors.
The Vietnamese government has invested heavily in infrastructure. The investments have seen the upgrading of some projects like the railway line and the construction of the port. The government aims at increasing efficiency as well as reducing the costs of doing business. These, among other factors, have helped Vietnam attract foreign investors.