Strong Growth Predicted for Vietnam’s 2024 FDI Landscape

Vietnam's foreign direct investment (FDI) landscape in 2024 is set for significant expansion, driven by opportunities in technology, renewable energy, healthcare, banking, and real estate. Investor-friendly policies, tax incentives, and emerging industrial hubs beyond Hanoi and Ho Chi Minh City make Vietnam an attractive destination for foreign investors seeking sustainable long-term growth.

This article explores Vietnam’s dynamic investment climate, the top sources of FDI, and the prominent sectors attracting foreign capital.

Vietnam’s Current FDI Landscape

According to Vietnam’s Foreign Trade Agency, the country experienced a surge in FDI in January and February 2024, recording an influx of over US$4.29 billion, a significant increase of 38.6 percent compared to the previous year. During this period, Vietnam granted investment certificates to 405 new projects, with a total registered capital of US$3.6 billion, a 55.5 percent increase in volume and double the value compared to the same time last year.

Additionally, 159 projects saw capital adjustments. The FDI disbursed in the first two months of 2024 amounted to US$2.8 billion, expanding by 9.8 percent compared to the same period in 2023.

Leading FDI destinations included Hanoi, Quang Ninh, Thai Nguyen, Ba Ria – Vung Tau, Bac Ninh, Dong Nai, Bac Giang, Ho Chi Minh City, Hai Phong, and Hung Yen. These 10 regions accounted for 81.7 percent of the FDI received by Vietnam during January-February, with Hanoi leading the pack with nearly US$914.4 million, a 24.4-fold increase compared to the same period in 2023.

Top Sources of FDI in Vietnam

In the first two months of 2024, Singapore, Hong Kong, Japan, and mainland China were among the top sources of FDI out of 48 countries and territories investing in Vietnam, continuing a trend seen in 2023.

In 2023, Singapore led as the primary source of foreign investment, injecting US$6.8 billion, constituting 18.6 percent of the total FDI. Japan closely followed in second place, representing 17.9 percent of the total, while Hong Kong (China) secured the third position, contributing 12.8 percent of the total. Mainland China and South Korea also remained significant investors.

Key Invested Sectors

Between January and February 2024, investors injected capital into various sectors of Vietnam’s economy, with the processing and manufacturing industry taking the lead. This aligns with 2023 data, which saw the processing and manufacturing industry attract over US$23.5 billion, accounting for 64.2 percent of the total and marking a 39.9 percent year-on-year increase. Additionally, foreign-invested businesses posted a trade surplus of US$8.25 billion in January-February.

In 2024, Vietnam presents investment prospects across multiple frontier industries. The technology industry is experiencing substantial innovation and digitalization. Similarly, the renewable energy sector is gaining traction, with a rising focus on clean energy sources like solar and wind power to bolster Vietnam’s power supply sustainably. Moreover, there is significant anticipation regarding the demand-driven growth of the med-tech field and other healthcare-related industries.

Attractive Environment for High-Tech Ventures: Decree 10/2024/ND-CP

On February 1, 2024, the government released Decree 10/2024/ND-CP, formally rolling out new measures to incentivize high-tech parks and businesses within them. Effective from March 25, 2024, this decree offers benefits such as exemptions from land lease fees and reimbursement for land clearance expenses to investors in infrastructure projects within high-tech parks. It also includes stipulations for establishing and expanding high-tech parks.

Why Invest in Vietnam?

Vietnam stands out as a compelling investment destination among emerging markets due to several factors:

• Strategic Location: Situated in Southeast Asia along key shipping routes, Vietnam serves as a strategic hub for manufacturing and trade, offering access to lucrative markets like China.

• Growing Economy: With robust GDP growth consistently surpassing global and regional peers, Vietnam’s dynamic economy presents fertile ground for long-term investment.

• Stable Government: A stable government with a clear economic vision ensures a conducive investment environment characterized by fair policy control, minimal investment barriers, and robust incentive schemes.

• Ease of Doing Business: Improved ease of doing business rankings underscore Vietnam’s commitment to facilitating foreign investment, streamlining bureaucratic processes, and enhancing transparency.

• Industrial Zones: Well-developed Economic Zones, Industrial Parks, Business Districts, and Residential Centers provide modern infrastructure and amenities conducive to establishing and expanding operations.

• Strong FDI Environment: Vietnam’s robust FDI environment highlights investor confidence and commitment to long-term growth.

• Growing Consumer Spending: With a population exceeding 95 million and a burgeoning middle class driving consumer spending, Vietnam offers a fertile market ripe with opportunities across diverse sectors.

• Network of FTAs: As a signatory to over 18 Free Trade Agreements (FTAs), Vietnam enjoys preferential trade advantages across the Asia-Pacific region, ASEAN, Europe, and beyond, providing investors with greater access to global markets and supply chains. Membership in the WTO and adherence to major international Intellectual Property Protection conventions ensure investor protection and intellectual property rights enforcement.

Summary

Vietnam presents abundant opportunities for FDI in 2024, especially in high-tech sectors. Government policies and long-term incentive programs, including regional administrative reform, fostering PPPs, and providing tax breaks, contribute to a favorable investment climate, making Vietnam a highly attractive destination for new and mature investors alike.