There are many reasons why Vietnam market has been always attractive to foreign investors.

2016 has been a successful year for Vietnam, continuing its emergence as both a leading ASEAN economy and a global player. The year has witnessed strong growth of FDI thank to the improvement of the economy, political stability and low labor cost compared to that of other countries in the same region. It is believed that the Vietnamese economy will continue to grow despite that economic recession has influence on other Asian countries. GDP was 6.2% in 2016 and forecasted to increase to 6.7% in 2017 due to higher consumption power from the middle class. It is forecasted that the middle class in Vietnam will grow double size, to 33 million people in 2020 and that in Ho Chi Minh city will grow the fastest in South East Asia according to Boston Consulting group.

Besides, the Vietnamese economic growth is also beneficial from the return of Vietnamese oversea. This is an important factor for GDP growth in general and for the development of startup community in Hanoi and Ho Chi Minh cities.

Sustainable economic growth and growing population are two important factors for Hanoi and Ho Chi Minh to be continuously in top 10. However, continuous efforts should be maintained for the two cities to be able to remain in their top rank in the long term.

The transition to high tech-based valuable activities is still in its early stage. Traffic jam and pollution are big hindrance to improve living quality and labour productivity.

“The transition to knowledge-based economy can be slowed down because of huge shortage of high level labour training centres. These challenges require specific plan and investment to be tackled properly. At present, the government is carrying out steps to liberate business environment and create favourable conditions for the development in near future. Vietnam has many opportunities to be successful.

To evaluate the attraction of Vietnam to foreign investors, the 2016 Asian enterprise survey was carried out for more than 2,500 enterprises from China, Hong Kong, Malaysia, Singapore, Indonesia, Thailand, etc. The result showed that more than one fourth of the surveyed organisations have plan to expand market in Vietnam in the next 3-5 years. Companies from Malaysia, Singapore and Thailand showed special attention to Vietnamese market. Potential areas are construction, real estate and properties, energy, natural resources, medical care, health care, production industry.

According to a research, Vietnam rank second in South East Asia to be one of the best investment market. The reasons are: (1) Vietnam has stable political environment, (2) Vietnam has good business environment, (3) Vietnam has young population and (4) the middle class in Vietnam has been increasing every year.

Vietnam signed a free trade agreement with the European Union (EVFTA) in 2016, eliminating trade tariffs by 2018, among other provisions. With the US withdrawal from TPP, there has been warning about FDI decrease. However, the result has showed that the Vietnamese business environment has never been less attractive to foreign investors and independent from TPP. Vietnam continues to diversify its economic partners, such as through increased ASEAN integration, the proposed Regional Comprehensive Economic Partnership (RCEP, covering 3.4 billion people and which may emerge as the alternative to the TPP), and the EVFTA.

Mr. Eric Tham, head of the research group of UOB bank shared his opinion: “Over the last 20 years, I have seen big changes in Vietnam, which allures foreign investors. Despite challenges and difficulties, Vietnam has maintained stable index, especially after 2009, the economy has grown fast, at 6.7%. This is the key reason for Vietnam to have become an ideal investment destination.

Mr. Do Nhat Hoang, head of foreign investment department, ministry of investment and planning, said “growing economy and political stability are not the only reasons but also low competitive tax rate. The Vietnamese government pays special attention to reform administrative procedures for both national and foreign investors.

Mr Do Nhat Hoang also affirmed that Vietnam will be consistent to attract sustainable and green investment basing on high level human resource. High tech technology, biological, health, education projects are highly encouraged. He said “Vietnam won’t trade environment to grow economy.

Vietnam Economic Indicator 2017 Source: Internet

Vietnam Trade Statistics Source: Internet

Vietnam need capital, but more importantly need high and modern technology for restructuring the economy comprehensively and improving productivity capacity. Therefore, it is expected to receive them in Vietnam.

The World Bank’s 2017 Doing Business report released on October 26 showed that Vietnam went up in the ranking from 91 out of 189 countries in the world in the 2016 report to 82 out of 190 countries in the 2017 report.

Vietnam FDI Statistics 2016 Source: Internet

In 2016, the Republic of Korea was the main provider of FDI. Largely due to investments by LG, the country invested over US$ 7 billion in Vietnam. Investors come from 95 countries. As can be seen in the table, most investments came from within Asia; the only non-Asian country in the top 10 of FDI providers are the British Virgin Islands. However, in the first half of 2017, Japan has lead the list with total investment capital of 5.08 billion USD, accounting for 26.45% of total FDI. Korea has fallen to the second with 4.95 billion USD, accounting for 25.79% of total FDI.

Main investment industries are manufacturing and processing sector, automobiles and motorbike wholesale, and real estate sector. Ho Chi Minh City was the main receiver of Vietnam’s FDI. Other popular destinations include Dong Nai, Binh Duong, Bac Ninh, Bac Giang, etc.

Top destination for inbound FDI in Vietnam Source: Internet

By half of 2017, the registered foreign investment in Vietnam has been recorded at 19.2 billion USD. FDI has increased by 50% compared to 2016. In the first half of this year, there have been 1,183 new projects that have been granted investment permit in Vietnam with total registered capital of 11.83 billion USD.

Objectively, the Vietnamese economy is on positive move and has been evaluated as the fastest developing country in Asia, thus attracting more and more foreign investment.

BiziVietnam helps Finnish companies/ investors to expand your business in new emerging market like Vietnam.

Hang Do

Source: bizivietnam.com