Vietnam: Foreign Investment

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FDI in Figures

Vietnam's Department of Foreign Investment calculated 2017 FDI at USD 35.9 billion, a 42.3% increase year-to-year. Traditionally directed towards light industry, FDI inflows quickly turn towards heavy industry, real estate and tourism. Inflows are expected to continue, confirming the country's position as one of the most attractive country in terms of FDI in Asia. The main investor countries were Japan, South Korea and Singapore, with the manufacturing and processing sectors attracting the most FDI followed by real estate and professional activities/science/technology (Trading Economics). Total FDI stock reached USD 129.4 billion (60% of GDP) in 2017.

Vietnam maintained 69th place in the 2019 Doing Business Report. The greatest progress has been made in protecting minority shareholders and cross-border trade. Vietnam expects disbursed foreign direct investment to continue to rise as the government steps up efforts to attract factories into the country. The Ministry of Planning and Investment aims to draw more FDI into areas including export-oriented, energy and high-technology by building a more business-friendly environment. FDI now allows Vietnam to produce high value-added products such as smart phones and tablets. The country is willing to create a more favourable environment for foreign investors. More information can be found at the Investment and Trade Promotion Centre of Ho Chi Minh City (ITPC).

Country Comparison For the Protection of Investors

	Vietnam	East Asia & Pacific	United States	Germany
Index of Transaction Transparency*	7.0	5.0	7.0	5.0
Index of Manager’s Responsibility**	4.0	5.0	9.0	5.0
Index of Shareholders’ Power***	7.0	6.0	4.0	8.0
Index of Investor Protection****	5.3	5.2	6.5	6.0

Source: Doing Business - Latest available data.

Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action. **** The Greater the Index, the Higher the Level of Investor Protection.

Foreign Direct Investment	2015	2016	2017
FDI Inward Flow (million USD)	11,800	12,600	14,100
FDI Stock (million USD)	102,791	115,391	129,491
Number of Greenfield Investments***	232	277	247
FDI Inwards (in % of GFCF****)	25.5	27.5	n/a
FDI Stock (in % of GDP)	53.7	57.3	n/a

Source: UNCTAD - Latest available data.

Note: * The UNCTAD Inward FDI Performance Index is Based on a Ratio of the Country's Share in Global FDI Inflows and its Share in Global GDP. ** The UNCTAD Inward FDI Potential Index is Based on 12 Economic and Structural Variables Such as GDP, Foreign Trade, FDI, Infrastructures, Energy Use, R&D, Education, Country Risk. *** Green Field Investments Are a Form of Foreign Direct Investment Where a Parent Company Starts a New Venture in a Foreign Country By Constructing New Operational Facilities From the Ground Up. **** Gross Fixed Capital Formation (GFCF) Measures the Value of Additions to Fixed Assets Purchased By Business, Government and Households Less Disposals of Fixed Assets Sold Off or Scrapped.

What to consider if you invest in Vietnam

Strong Points

The main strengths of the country's economy are:

Steady and stable growth of 6.3% in 2017 (Business France, 2018) with positive economic outlook
A young, inexpensive, skilled and fast growing workforce
Socio-political stability
A regional hub of competitive and attractive industrial production
A government that seeks to liberalise the economy and introduce free market reforms
Agricultural and energy production sectors that can rely on abundant resources but are still largely under-exploited

Weak Points

The main obstacles to the development of the country are:

Weak health and transport infrastructure
Weak financial structures and in particular the banking sector: the regulation of the financial sector has many shortcomings and its lack of independence vis-à-vis the government makes it opaque.
A complex business environment: financial investments are subject to a whole series of opaque regulations that can not be legally guaranteed and intellectual property rights are not systematically respected
A non-transparent legal framework: the judicial system is subject to political influences, and commercial disputes often take years to resolve
A high level of corruption
Great disparities of development and poverty in many regions
Recurring tensions with China on the subject of sovereignty in the South China Sea

Government Measures to Motivate or Restrict FDI

The promotion of foreign investments is part of Vietnam's development strategy. To that end, the government is improving its judicial system, creating more incentives and taxation policies for foreign investors and trying to respect its commitments with regard to the international community. "Business Forums", opportunities for foreign investors to establish fruitful dialogue and to assert their interests, are frequently organised between the Vietnamese government and the private sector. Additionally, Vietnamese efforts to maintain socio-political stability and set up and professionalise investment promotion activities also play a crucial role in increasing the FDI flow. Recent moves to diversify the economy and shift to high value-added industries also demonstrate the country's desire to attract new types of FDI.

Procedures Relative to Foreign Investment

Freedom of Establishment

The Government has relentlessly perfected its legal system, created more incentive policies for foreign investors and tried to fulfil its commitments to the international community. As well, Vietnam's efforts to maintain its socio-political stability and step up and professionalise investment promotion activities play a crucial role in increasing the FDI flow.

Acquisition of Holdings

Yes

Obligation to Declare

It's obligatory to declare any FDI.

Competent Organisation For the Declaration

Ministry of Foreign Affairs
Ministry of Planning and Investment

Requests For Specific Authorisations