Prime Minister Pham Minh Chinh visits Samsung's factory, Thai Nguyen province, September 3 - Photo: VGP/Nhat Bac

According to the Ministry of Planning and Investment (MPI), the implemented capital of FDI projects rose 13.9% yoy to US$1.2bn in August 2022, thus lifting the implemented capital of FDI projects in 8M22 to US$12.8bn, increasing 10.5% yoy (vs. a 1.6% increase in 8M21). Meanwhile, pledged capital of FDI projects dropped 48.3% yoy to US$1.2bn in August. For 8M22, pledged capital of FDI projects declined 12.2% yoy to US$16.8bn.

To be more specific, 1,135 (equivalent to the same period in 2021) newly licensed projects in 8M22 with a pledged capital of US$6.4bn, a decline of 44.0% in terms of registered capital compared to the same period in 2021; 676 projects (5.8% yoy) licensed in the previous years approved to adjust investment capital (incremental FDI) with a total additional capital of US$7.5bn (50.7% yoy); 2,425 (-10.8% yoy) turns of capital contribution and share purchases of foreign investors with a total value of the capital contribution of US$2.9bn (3.6% yoy).

The decrease of pledged FDI in 8M22 was mainly because in the same period last year, a very large-scale project was recorded, namely the Long An I, II liquefied natural gas (LNG) power plant worth US$3.1bn and the Omon II thermal power plant worth US$1.3bn. Meanwhile, the largest pledged FDI project in 8M22 is the Lego's toy factory, worth US$1.3bn.

In addition, many large enterprises are also suspending new investment and production expansion plans in the context of the global economic uncertainty, including 1) slowing global growth, (2) high inflation weighing on consumers' wallets, (3) strong USD appreciation puts pressure on emerging market and frontier market exchange rates and (4) financial market liquidity tightens due to the Fed's rate hike.

However, Mr. Dinh Quang Hinh, analyst at VNDirect believes that the decline in pledged FDI inflows into Vietnam will not last long and is expected to recover from 2023.

“We believe that Vietnam possesses outstanding advantages compared to its competitors to attract international FDI inflows in the near future, including competitive labour costs, favorable geographical location (proximity to the production center in southern China), political stability and incentives from many FTAs (Free-TradeAgreements). We see that recently, there have been a number of global technology giants intending to invest and expand production in Vietnam in the near future”, said Mr. Dinh Quang Hinh.

Some of the world's largest technology firms intend to move part of their production lines to Vietnam in the near future. For example, APPLE is planning to manufacture IPhone and IPad in Vietnam while GOOGLE is planning to move part of its mobile phone production line (GOOGLE Pixel 7) to Vietnam.

Moreover, two Chinese technology giants, XIAOMI and OPPO, also intend to set up manufacturing activities in Vietnam.

“We maintain our forecast that the implemented FDI in 2022 will grow by 10% yoy while pledged FDI capital to decline by 5-10% compared to the last year. It should be noted that FDI inflows into Vietnam decreased sharply in 3Q21 because many provinces and cities across the country had to blockade to control the fourth wave of COVID-19 pandemic”, said Mr. Dinh Quang Hinh.