In a context where global foreign investment increased by 10.9% in 2013, in particular in Europe (+25.2%) and in Latin America (+17.5%), FDI flows to developing economies reached a new high of US$759 billion. However macroeconomic fragility and policy uncertainties are driving investors to caution.
FDI inflow has increased considerably since the country authorized foreign investments back in 1988, and it has reached record levels in 2010 and 2011. The social-political stability of the country is one of its main assets. Although FDI was affected by the global economic crisis, showing a drop in 2009, the policy of economic openness has since 2010 resulted in growing investor attraction: the FDI flows increased to $11 billion in 2011 (they were less than $2 billion at the beginning of the 2000s).
In 2013 FDI reached 8.2 billion USD.
Traditionally, Vietnam was directed towards light industry, but FDI is now rapidly growing in heavy industry, real estate and tourism.
Investment planners in Vietnam estimate a significant growth in the FDI capital, confirming the country's third position amongst Asian nations, in terms of investment attractiveness just behind China and India. Some measures remain to be taken for the improvement of Vietnam's competitiveness in order to attract more FDI, namely the improvement of its legal procedures, the acceleration of the process of setting the legislation for investments and companies, the intensification of the decentralization process, the creation of an incentive policy for the development of supporting industries and the simplification of economic partnerships. For more information, you can consult The Investment and Trade Promotion Center of Ho Chi Minh City (ITPC).
Information on the 2013 FDI influx in this region can be accessed in the Global Investment Trade Monitor published in January 2014 by the United Nations Conference on Trade and Development (UNCTAD).
|Vietnam||East Asia & Pacific||United States||Germany|
|Index of Transaction Transparency*||6.0||5.0||7.0||5.0|
|Index of Manager’s Responsibility**||1.0||5.0||9.0||5.0|
|Index of Shareholders’ Power***||6.0||9.0||5.0|
|Index of Investor Protection****||3.0||5.4||8.3||5.0|
Source: Doing Business - Last Available Data.
Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action. **** The Greater the Index, the Higher the Level of Investor Protection.
|Foreign Direct Investment||2011||2012||2013|
|FDI Inward Flow (million USD)||7,519||8,368||8,900|
|FDI Stock (million USD)||64,434||72,802||81,702|
|Performance Index*, Ranking on 181 Economies||13||-||-|
|Potential Index**, Ranking on 177 Economies||38||-||-|
|Number of Greenfield Investments***||178||161||121|
|FDI Inwards (in % of GFCF****)||20.7||22.2||21.6|
|FDI Stock (in % of GDP)||47.5||46.7||47.9|
Source: UNCTAD - Last Available Data.
Note: * The UNCTAD Inward FDI Performance Index is Based on a Ratio of the Country's Share in Global FDI Inflows and its Share in Global GDP. ** The UNCTAD Inward FDI Potential Index is Based on 12 Economic and Structural Variables Such as GDP, Foreign Trade, FDI, Infrastructures, Energy Use, R&D, Education, Country Risk. *** Green Field Investments Are a Form of Foreign Direct Investment Where a Parent Company Starts a New Venture in a Foreign Country By Constructing New Operational Facilities From the Ground Up. **** Gross Fixed Capital Formation (GFCF) Measures the Value of Additions to Fixed Assets Purchased By Business, Government and Households Less Disposals of Fixed Assets Sold Off or Scrapped.
Foreign investment is subject to an array of unclear regulations, which cannot be legally guaranteed. The judiciary is subject to political influence, and commercial cases often take years to be resolved.
The promotion of foreign investments is part of the country's development strategy. Therefore, the government has never stopped perfecting its judicial system, creating more incentives and taxation policies for foreign investors and trying to respect its commitments with regard to the international community. "Business forums" are frequently organized between the Vietnamese government and the private sector, these being opportunities for foreign investors to establish fruitful dialogue and to assert their interests. Additionally, Vietnamese efforts to maintain socio-political stability and set up and professionalize investment promotion activities also play a crucial role in increasing the FDI flow.
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Last Updates: October 2014