Decreased but more substantial registration
Data from the Ministry of Planning and Investment’s Foreign Investment Agency show that in the first 10 months of 2019, Vietnam attracted US$12.8 billion through new FDI projects and US$5.4 billion through increases in the capital of ongoing projects, down 15 percent and six percent, respectively, compared with the same period last year. SSI analysts have seen optimistic signs despite these decreases.
Specifically, the number of projects keeps growing. The number of new projects registered and ongoing projects increasing their capital in the first 10 months of 2019 increased respectively by 26 percent and 20 percent compared with the same period last year. The increased number of projects has brought about higher demand for labor, land and logistics services. The rental price of land in industrial parks of major provinces and cities, such as Dong Nai, Binh Duong and Bac Ninh, has grown continuously in recent years.
The processing and manufacturing industries, which are the backbone of the economy, continue to attract foreign investors. In the first 10 months of this year, these industries attracted US$9.1 billion through new FDI projects and US$4.7 billion through increases in the capital of ongoing projects, up 33 percent and one percent, respectively, compared with the same period in 2018.
Notably, most large-scale FDI projects in the first 10 months of 2019 were concentrated in the processing and manufacturing industries. Examples include LG Display Hai Phong, an FDI project of the Republic of Korea (RoK), which increased its capital by US$410 million; and Goertek (Hong Kong, China), a new project based in Bac Ninh Province with investment capital of US$260 million.
FDI from China soars
The RoK and Japan were the two largest foreign investors in Vietnam in the first 10 months of 2019, with US$66 billion and US$59 billion, respectively. Meanwhile, Hong Kong (China) and China invested US$22.3 billion and US$15.8 billion, respectively.
“FDI from China and Hong Kong (China) has increased rapidly. This is attributed to not only the US-China trade war but also strict Chinese regulations which stimulate Chinese companies to move manufacturing facilities to neighboring countries,” SSI said.
However, increases in land rent and labor cost will reduce Vietnam’s attraction to foreign investors. Stagnant circulation of goods through overland transportation and ports will also discourage investors to invest in Vietnam.
Timely and appropriate policy changes are necessary for Vietnam to continue attracting FDI. Resolving bottlenecks in infrastructure and human resources will enable the country to make the most of opportunities from free trade agreements and the US-China trade war.
