The structure of FDI capital invested in manufacturing has shifted positively with the increasing trend of investment projects in the high-tech sector with the participation of many large corporations and companies in the world.
Reliable investment environment
Hyosung Group (the Republic of Korea) recently announced a plan to invest an additional four billion USD, doubling the total capital that this enterprise has invested in Vietnam. Chairman of Hyosung Group Cho Hyun-joon stated that Vietnam’s investment environment is reliable and voiced his belief that Vietnam will become the manufacturing centre of Asia.
The continued expansion of the investment scale shows that Hyosung is fulfilling its commitment to place the future of the next 100 years in Vietnam as promised before. Currently, Hyosung is the third largest FDI partner of the RoK in Vietnam, after Samsung and LG. In the coming time, this group is expected to expand investment in projects in the fields of data centres, production of high-tech industrial materials, sustainable biofuel plants, and carbon fibres.
Notably, Hyosung also plans to invite the Abu Dhabi National Oil Corporation (ADNOC) of the United Arab Emirates (UAE) to be its investment partner in Vietnam, with expectation that this will become a new business cooperation model between Vietnam, the RoK, and the UAE. In particular, Hyosung will play a connecting role in attracting investment from the Middle East to Vietnam.
Vietnam attracted more than 24.7 billion USD in FDI capital in the first nine months of 2024, an increase of 11.6% over the same period in 2023. In September alone, the total FDI capital in Vietnam reached nearly 4.26 billion USD, an increase of 8.9% and accounting for 17.2% of the total investment capital in the nine months, the highest level since the beginning of the year.
The additional investment capital also reached the highest level with projects expanding capital on a large scale. According to Savills Vietnam, the structure of FDI capital invested in manufacturing has shifted positively with an increasing trend of investment projects in high-tech fields such as electronics and component manufacturing, instead of focusing on traditional industries such as textiles, wood, etc.
Minister of Planning and Investment Nguyen Chi Dung said that Vietnam has formed a large-scale semiconductor and artificial intelligence ecosystem in the region, with the participation of many large corporations such as Google, Meta, Qualcomm, Intel, Nvidia, AMD, and many other high-tech enterprises in the electronics industry.
Vietnam is converging all the necessary conditions to develop the semiconductor and AI industries. We have a stable political system, high political determination, especially a large, enthusiastic young workforce with the ability to access science and technology, especially in STEM fields. Human resources are Vietnam's biggest advantage today.
Selecting priority sectors
Considering that Vietnam has achieved the fastest GDP growth in ASEAN thanks to its openness to FDI, Frederic Neumann, HSBC’s Chief Economist for the Asia-Pacific region, recommended that Vietnam should maintain its openness to foreign investment to continue to stand out from other countries. Vietnam’s active participation in free trade agreements has brought many trade benefits, creating an advantage in the competition to attract FDI among countries in the region, and can increase its attractiveness if labour issues, electricity connections and logistics infrastructure are improved.
Recently, Vietnam has received the attention of FDI investors in many new and high-tech industries. Earlier this year, the Ministry of Planning and Investment expected that total registered FDI capital in Vietnam in 2024 would reach about 39-40 billion USD, focusing on attracting large-scale, high-tech FDI projects in the processing, manufacturing, electronics, semiconductor, and hydrogen industries. This trend is consistent with Vietnam's FDI attraction orientation in the country's new development stage.
In the updated report for the third quarter of 2024, HSBC Bank stated that Vietnam continues to attract foreign capital flows as fundamental aspects remain positive. Although newly registered FDI growth decreased in the third quarter of 2024, sectors such as real estate and energy witnessed increased investment. In the future, capital flows into manufacturing are likely to remain stable as Vietnam's increasing efforts to strengthen relations with international partners will create favourable conditions to attract further investment.
According to Professor, Doctor of Science Nguyen Mai, Vietnam has enjoyed a stable FDI inflow that is among the highest in ASEAN in terms of percentage of GDP. Competitive costs and a favourable investment environment play a key role in attracting foreign businesses. However, in the context of increasingly intense global competition to attract FDI, along with developments such as the implementation of global minimum taxes, adapting to the global investment environment has become more complicated.
To overcome challenges and take advantage of opportunities to attract more and more high-quality and economically efficient FDI projects, faster innovation in thinking and action is very important, focusing on three factors: institutional improvement, infrastructure modernisation, and state management innovation.
The largest investment partners in the first nine months of 2024 are all traditional partners of Vietnam and come from Asia. Of which, the top 5 countries/territories, namely Singapore, China, the Republic of Korea, Hong Kong (China), and Japan, accounted for 73.2% of new investment projects and 75.2% of total registered investment capital in the country. Regarding the FDI capital structure, 63.1% of investment capital was poured into the processing and manufacturing industry; 17.7% was invested in real estate business activities; 4.5% in production and distribution of electricity and water; and 3.4% in professional activities, science and technology, etc.
Source: The Foreign Investment Agency under the Ministry of Planning and Investment
