Vietnam remains an attractive investment destination in Asia, wooing over 300 foreign enterprises to invest or expand their investments in the country during January, the Ministry of Planning and Investment reported. 

The manufacturing industry is one of the sectors
attracting FDI inflows in recent times

According to a report released by the Economist Intelligence Unit (EIU) late last year, Vietnamese success in FDI attraction attributed to the country’s 4.5% economic growth in the final quarter of 2020, along with stable industrial production, the increase of the consumer price index, and benefits gained from new-generation free trade agreements (FTAs).

These factors have served to become the driving force for foreign businesses as they strive to swiftly establish hi-tech product factories throughout the country.

The World Bank (WB) also pointed out that despite the State Bank of Vietnam lowering interest rates in October, the banking industry has maintained credit growth of 10.1% at the end of 2020.

The country’s initial breakthroughs in COVID-19 vaccine production has opened up bright prospects ahead for its economic recovery, especially in terms of the tourism and aviation industries, which have been the hardest hit by the COVID-19 pandemic.

Takeo Nakajima, chief representative of the Japan Trade Promotion Organization (JETRO), emphasised that with the COVID-19 pandemic under control in Vietnam, FDI inflows from global supply chains are expected to rapidly shift to the country in 2021.

Nakajima noted that Vietnam represents a location with a safe and stable investment environment, whilst there is plenty of room for development in the domestic market moving forward.

A representative from Panasonic Group indicated that the company decided to move its Thai factory to Vietnam from the beginning of 2020 as a result of the huge market potential that exists.

According to studies released by the company, Vietnamese consumers bought 2.8 million refrigerators and 2.27 million washing machines last year, a far higher rate than that of the Thai market.

Moreover, the Government’s investment incentives have facilitated greater FDI inflows into the country. Several high-tech firms are now exempt from import tax on raw materials and components, in addition to enjoying other preferential treatment.

Along with advantages of cheap labour costs, experts underlined the necessity of supplementing a high-quality workforce and fine-tuning the legal system to further attract FDI in the near future.

Pham Xuan Hong, chairman of Ho Chi Minh City Textile and Garment Association, underscored the importance of luring FDI in a selective manner, with priority given to high-tech production enterprises. Indeed, these could provide a fresh impetus for businesses to enhance production capacity whilst increasing their market share, as well as fully tapping into the benefits of FTAs.