Vietnam: FDI Strategy for 2018-2023
Vietnam’s Ministry of Planning and Investment, with the assistance of the World Bank, is currently drafting a new FDI strategy for 2018-2023 focusing on priority sectors and quality of investments, rather than quantity. The new draft aims to increase foreign investment in high-tech industries, rather than labor-intensive sectors. Manufacturing, services, agriculture, and travel are the four major sectors in focus in the draft.
Sectors in focus
The four major sectors in focus are:
- Manufacturing – It includes high-grade metals, minerals, chemicals, electronic components, plastics and high-tech;
- Services – Includes MRO (maintenance, repair, and overhaul) along with logistics;
- Agriculture – Includes innovative agricultural products i.e. high-value products such as rice, coffee, seafood and;
Travel – High-value tourism services.
The draft prioritizes FDI investments on a short-term and medium-term basis. In the short-term, industries with limited opportunities for competition will be prioritized.
- Manufacturing/Production – Automotive and transport equipment OEMs and suppliers;
- Environmental-friendly technology – Water conservation, Solar, Wind investments.
In the long-term, the emphasis is on sectors that focus on skills development, including:
- Manufacturing – Manufacturing of pharmaceuticals and medical equipment;
- Services – Services include education and health services, financial services, and financial technology (Fintech);
- Information technology and intellectual services.
The draft also includes recommendations about the further removal of entry-barriers and optimizing incentives for foreign investors such that their effect on the economy is maximized.
Foreign direct investment into Vietnam rose by nearly 7 percent year-on-year to USD 10.55 billion in January to July 2019. In addition, FDI pledges for new projects, increased capital and stake acquisitions - which indicate the size of future FDI disbursements – surged from a year earlier to USD 20.22 billion. The manufacturing and processing industry are set to receive the largest amount of investment (71.5 percent of total pledges), followed by real estate (7.3 percent) and wholesale and retail sector (5.4 percent). Hong Kong was the biggest source of FDI pledges in the first seven months of 2019 (26.9 percent of total pledges), followed by South Korea (15.5 percent) and China (12.3 percent). Foreign Direct Investment in Vietnam averaged 6.35 USD Billion from 1991 until 2019, reaching an all time high of 19.10 USD Billion in December of 2018 and a record low of 0.40 USD Billion in January of 2010.
(Source: Tradingeconomics.com, Ministry of Planning and Investment, Vietnam).
Majority of the foreign investments in Vietnam are from Korea, Japan, and Singapore. Rather than been over-dependent on Asian countries, Vietnam has to promote itself further and increase investments from the EU, US, and other countries outside Asia-Pacific. With the EU-Vietnam FTA and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), Vietnam has an opportunity to increase investments from countries outside Asia. (Source: Vietnam Briefing).