Recovered confidence boosts FDI
FDI into existing businesses was solid with recovered FDI’s business confidence.
According to the latest update from the Ministry of Planning and Investment, except for a sharp plunge in new FDI pledges, other FDI activities posted impressive growth in January 2022. It can be seen that foreign investors’ confidence remains highly strong in Vietnam’s economic outlook following the economic reopening, as shown by strongly increased foreign capital into existing projects (both FDI and FII), while investment into new projects keeps facing temporary difficulties due to stilluneased border-restricted measures.
To be more specific, both FDI inflows into existing projects via additional-pledged capital and share purchases remained markedly strong in the month. Accordingly, the amount of additional-pledged FDI into existing projects accounted for more than 60% of total registered FDI with USD1.27bn (169% YoY), followed by about USD0.44bn of foreign investment via share purchase (100.9% YoY, 21.1% share).
Meanwhile, new pledged FDI fell sharply to only USD0.39bn (-70.7% YoY, 18.5% share), which is among the lowest levels on record. However, KB Securities believes that a slowdown in FDI into new projects was just affected by temporary factors, as several measures of foreign investors’ investment demand were more on the positive side. In total, despite the plunge in newly pledged FDI, total pledged FDI reached up to USD2.10bn (4.2% YoY) in January.
On the other hand, the disbursement activity temporarily decelerated due to labor shortages and delayed economic activity because of Tet’s holiday, posting USD1.61bn (6.8% YoY).
Some noticeable FDI projects include the following: The projects of manufacturing electronic products, network equipment, and multimedia products of Goertek Group (Hong Kong, China) in WHA Industrial Park, Nghe An province, increased their investment capital by US $260 million; the commercial and service projects of GE Vietnam (Korea) adjusted to increase investment capital by US $216.9m; the electronic component factory project (JNTC – Korea) adjusted to increase investment capital by US $163.3m in order to expand the production line of tempered glass for car and watch screens; and cover glass for cameras.
Mr. Nguyen Chi Dung, Minister of Planning and Investment said that based on the successful foundation of 2021, in 2022 and in the following years, FDI would strongly flow into Vietnam, not only because of its inherent advantages, but also because Vietnam’s new policies on FDI attraction have caught up with the international trend.
However, Prof., Dr. Nguyen Mai, Chairman of the Association of FDI Enterprises (VAFIE), said there are still many bottlenecks to be removed, otherwise, they will negatively affect Vietnam’s FDI attraction, such as improving investment environment by modifying legal frameworks; simplifying administrative procedures; eliminating troublesome procedures for investors and businesses; strictly and promptly handling any violations related to land, environment, tax evasion, transfer pricing, labor disputes; ensuring the requirements of the new generation FTA such as responsible business, abolition of forced labor, no use of child labor,…