Free trade agreements, high economic growth and low labor costs will continuously help Vietnam lure big FDI in the remaining months of the year after reporting a whopping US$22.94 billion in the first seven months of the year.
Many investors from various countries, especially Japan, Korea and Singapore, have so far also expected to increase their investments in Vietnam.
A recent study of Hong Kong and Shanghai Banking Corporation Limited (HSBC) showed that overall investment into ASEAN in the future is expected to rise amongst Singapore-based companies ,with Vietnam to be a key beneficiary.
According to the study, which sought the insights of 1,036 Singapore-based companies into their interest in overseas expansion, Vietnam’s growing consumer market and overall investment climate are driving the expansion plans of Singaporean investors, who were Vietnam’s third largest investor in the first seven months of 2018 with US$2.73 billion.
Asia Briefing, a subsidiary of Dezan Shira & Associates, which provides business intelligence, due diligence, and legal, tax and advisory services throughout Vietnam and the Asian region, also forecast that Vietnam will continue to remain a priority for investors in 2018.
Opportunities not only exist in the traditional sectors such as garments, footwear, and electronics but also in renewable energy projects, high-tech agriculture, and other high-tech industries, according to Asia Briefing.
“Investors will continue to find the traditional export-oriented sectors such as electronics, garments, and footwear to be attractive. In addition to the export-oriented sectors, the domestic market also provides an opportunity for investors. With growing urbanization and rising incomes, industries such as education, real estate, retail, food & beverages, e-commerce, and FMCG will continue to grow in 2018,” said Asia Briefing. “The aforementioned industries will continue to be a priority for the government in the short term.”
High prospects ahead
The signing of the Europe-Vietnam Free Trade Agreement (EVFTA) due this year is one of key factors helping Vietnam attract foreign investors, especially in the textile, garment and footwear industries.
According to Chairman of the Vietnam Textile and Apparel Association (VITAS) Vu Duc Giang, the EVFTA will continue to create great attraction to foreign investors in Vietnam’s garment and textile industry.
The EVFTA is the driving force to help Vietnam emerge as one of the top spots in the world for investors in the garment and textile industry, Giang said, adding the industry lured US$2.8 billion of FDI capital in the first half of this year, bringing the total FDI in the sector to nearly US$17.5 billion.
Foreign investors are flocking to Vietnam’s textile and industry as the EVFTA will offer ample opportunities for Vietnamese textile and garment products to ship to the European market thanks to tariff preferences.
According to EU-MUTRAP team leader Claudio Dordi, only ‘EVFTA originating’ products will benefit from preferential tariffs for a maximum of seven years after entry into force. Investors from other countries thus wish to relocate sufficient stages of textile and garment manufacturing to Vietnam to benefit from market access offered by the EVFTA.
Nguyen Thi Tuyet Mai, VITAS’s secretary general, said that traditionally, China, Taiwan (China) and South Korea lead the way as far as textile and garment projects implemented in Vietnam. However, Mai forecasts, South Korea is likely to pull ahead in the competition as besides the bilateral FTA with Vietnam, the country has also inked a cooperation agreement with the EU. When choosing Vietnam as a destination for investment, Korean investors will further enjoy the benefit.
The same trend will be also forecast for the footwear industry when more foreign investors will set up production bases in Vietnam to capitalize on huge export potentials from the EVFTA.
According to Lee Young Man, president of the Korean Footwear Association in Vietnam, investment flows from Korean footwear enterprises to Vietnam are expected to increase strongly once the EVFTA is signed.