VN looks to remain a strong competitor for global FDI

Monday, Feb 26, 2024 11:18

Workers at a semiconductor factory located in HCM City. — VNA/VNS Photo Hoàng Hùng

Việt Nam remained an exception in attracting Foreign Direct Investment (FDI) on the global and regional scale last year. The Southeast Asian economy was expected to attract a large amount of FDI this year, said economists and analysts. 

Data from the United Nations Conference on Trade and Development (UNCTAD), according to Rồng Việt Securities Company (VDSC), showed global FDI in 2023 increased by 3 per cent compared to the year before, reaching over US$1.365 trillion, mainly attributed to a significant increase in European Union countries. FDI in the Asia-Pacific, traditionally a major force of global investment, recorded a 9 per cent decline, amounting to $849 million, including a 6 per cent reduction in China, a 47 per cent reduction in India and a 16 per cent reduction in ASEAN.

Việt Nam, Thailand and Indonesia, however, maintained impressive growth in FDI throughout 2023 with increases of 32.1 per cent, 42 per cent and 13.7 per cent, respectively, with Việt Nam topping the chart in FDI amount recorded. 

"Việt Nam remains an exception in attracting FDI in the global and regional context in 2023," said VDSC.

According to the Foreign Investment Agency, under the Ministry of Planning and Investment (MPI), the total registered FDI capital in Việt Nam reached $36.61 billion in 2023. The accumulated realised capital of foreign investment projects in the Southeast Asian economy was estimated at $23.18 billion, a 3.5 per cent increase from the previous year, setting a new national record in FDI disbursement. 

The number of newly registered projects in 2023 reached 3,188, a 56.6 per cent increase compared to the same period in the previous year, with the number of registered projects with increased capital growing by 14.0 per cent. Average registered capital per new project increased slightly by 3.6 per cent compared to 2022. 

According to fDi Markets, a global monitor of FDI sources, FDI into Việt Nam's processing and manufacturing industry accounted for 64 per cent of the total registered FDI capital, reaching $23.5 billion, a 39.9 per cent increase compared to the same period last year.

Energy remained a bright spot in 2023 with large projects including the $1.99 billion Thái Bình LNG Power Plant by Japan, the $1.5 billion photovoltaic cell production project by Chinese Jinko Solar and the $1.05 billion electronic component manufacturing projects by LG Innotek (South Korea). 

As of January 20, 2024, the total FDI capital in Việt Nam reached approximately $2.4 billion, a 40.2 per cent increase compared to the same period in 2023.

Newly registered capital reached $2.0 billion, a 66.9 per cent increase from the same period. In comparison, additional registered capital and capital contribution decreased by 23.1 per cent and 33.1 per cent, reaching $35.4 million and $16.5 million, respectively.

The significant increase in FDI in January 2024 has been said to be mainly due to large-scale real estate investment projects.

A major urban development project in Hà Nội with a total capital of $662 million accounted for 53.9 per cent of the total registered investment capital attracted in the first month of the year in the real estate business sector. Excluding this sudden surge, registered investment capital in the year's first month was equivalent to the same period in 2023. However, actual investment capital for foreign investment projects was estimated to reach $1.5 billion, a 9.6 per cent increase.

Thanks to the positive growth in FDI throughout 2023, the country's disbursement rate of FDI capital has significantly improved. In 2023, FDI disbursement reached $23.2 billion, a 3.5 per cent increase compared to 2022.

"Growth in FDI in January 2024 continued to reinforce our view that FDI disbursement may continue to accelerate due to the large amount of FDI registered in 2023 and multinational companies continuing to diversify their investments out of China. Việt Nam looks to remain an attractive investment destination due to advantages such as its strategic location, various free trade agreements (FTAs), and competitive labour costs. Upgrading diplomatic relations with the United States and Japan will help boost investment in Việt Nam," said Hà Nội-based VietCap Securities Company.

According to UNCTAD's forecast, global FDI flows may experience modest growth in 2024 due to predictions about inflation and borrowing costs in stable developing markets. However, negative developments are still overshadowing the positive direction, related to political risks, high debt levels in countries, and the risk of declining global economic growth. In addition, in 2024, voters in more than 80 countries and territories (representing over half of the world's population) are expected to vote in elections, which will also impact global investment.

VDSC experts say the prospects for attracting FDI in 2024 will remain positive due to Việt Nam's position as a potential destination for strategic diversification of supply chains by global manufacturers, the country's trend of positive economic growth, and a stable political environment. — VNS

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