Foreign Direct Investment

• FDI by sector
• FDI growth
• Special Economic Zones

FDI growth – Foreign direct investment (FDI) in Vietnam stood at US$16.1 billion for the year 2019 with the manufacturing and services sectors gaining the highest. As showcased in the figure below, FDI in the country has more than doubled since 2009, and this stands as a testament of Vietnam’s transformation into a magnet for foreign investment.

It is also important note Vietnam’s position relative to other emerging markets in Southeast Asia. In 2019, Vietnam stood second only to Indonesia in terms of FDI net inflows, despite having a smaller economy than its regional counterparts. As indicated in the figure below, Vietnam has consistently been among the more favoured ASEAN destinations for FDI, thus, proving that the country has succeeded in establishing credibility with foreign investors.

FDI by sector– Though the manufacturing industry has been the prime recipient of foreign investment over the years, it may soon be dethroned given that the services sector is slowly creeping up on its heels. As can be seen in figure 1 below, manufacturing constituted 34% of FDI in 2018, narrowly edging out services, which received 29% of total foreign investment.

But which are the countries that have been most invested in the Vietnamese economy? Figure 2 answers this question. Historically, South Korea has been the lead foreign investor in Vietnam, but in 2018 Japan climbed the ladder to occupy the top rung by increasing its share of FDI to 25%. Currently, Vietnam’s Asian peers are committing to its economy the most, but its continued drive towards economic progress may assist in drawing the attention of western forces as well.

Figure 1

Figure 2

Special Economic Zones (SEZs) –Given that SEZs are geographically dependent on the coastline, Vietnam has both a great abundance and future potential regarding SEZs. As can be seen in the map below, Vietnam already has 13 SEZs in place and has plans to add 3 more with US$2.5BN (in each SEZ) in infrastructure› investment projects and tax incentives, thus highlighting the rapid growth of Vietnam.