Improving investment environment, creating momentum to welcome FDI wave

Production activities of Kwong Lung Meko Company Limited - FDI enterprise in Can Tho . Photo: MY THANH

More optimistic about the market

The Provincial Competitiveness Index 2024 (PCI 2024) report published by VVCI recorded the feedback of 1,544 FDI enterprises from 77 countries and territories, most of which are from Asia (Korea accounts for 29.9%, Japan 22.6% and China 13.2%) stating that business prospects have improved. The percentage of foreign enterprises planning to expand production and business in the next 2 years is 37%, while the domestic private sector is only 33%. Compared to the PCI 2023 survey, the percentage of FDI enterprises planning to expand business is only 26%. 2024 also saw a marked improvement in the proportion of FDI enterprises planning to increase investment, with 40% of enterprises choosing to do so, a sharp increase compared to 30.3% in 2023. This recovery reflects the renewed optimism of foreign investors after two consecutive years of cautious expansion.

In 2024, the total registered FDI capital in Vietnam will reach about 38.23 billion USD; of which, newly registered capital will be 19.7 billion USD, down 7.6% compared to 2023, but the additional capital will increase by 50.4%, marking a strong recovery after a significant decline in 2022-2023. In the first 4 months of 2025, the total registered FDI capital in Vietnam will reach 13.82 billion USD (including newly registered capital, adjusted registered capital and capital contribution and share purchase value), up 39.9% over the same period in 2024. The FDI sector accounts for 71% of the country's export turnover in the first 4 months of 2025 and has a trade surplus of 14.31 billion USD (including crude oil).

Analysis of business expansion trends, employment growth and profit efficiency in PCI 2024 shows that the labor market has cooled down when only 49.5% of foreign enterprises recruited more workers, slowing down compared to 59.9% in 2023. However, it also reflects the trend of foreign investment shifting to capital-intensive industries and sectors such as semiconductors and electronic components, instead of labor-intensive industries. In addition, a positive signal is that in 2024, 48.7% of FDI enterprises reported profits, up from 46.5% in the previous year. This improvement in profits is accompanied by a sharp decrease in the rate of enterprises reporting losses to 22%, while in 2023, up to 42.3% reported losses. The rate of enterprises reporting losses in 2024 is at the lowest level in the 10 years of PCI surveys (2014-2024, the lowest reported loss was 33.4% and the highest was 51.3%). This shows that the investment environment has become more favorable, economic recovery has created momentum for the FDI sector to expand investment again.

The business recovery in 2024 through FDI sector perception is more positive than in 2023 but has not yet returned to pre-pandemic levels. In the period 2014-2019, the planned increase in investment capital of foreign enterprises fluctuated between 45.5% and 51.4%; the rate of enterprises reporting profits was always high at 53% or more. In the next 2 years, the plan to expand business scale is positive but enterprises are still more cautious in the face of impacts from external markets, especially changes in trade policies and unpredictable US tariffs.

Enterprises cautiously expand business

The PCI 2024 survey results in the FDI sector between the two groups of exporting and non-exporting enterprises recorded a cautious sentiment. 43.6% of exporting enterprises plan to expand their operations, while the non-exporting group has a rate of 35.5% (in 2023, the rates were 28.7% and 23.6% respectively) but have not yet returned to pre-pandemic levels. Some localities have enterprises planning to expand their business operations at a high rate, including Bac Giang 47.1%, Da Nang 42.9%, Hai Phong 42.6% and Hai Duong 42.4%; Ho Chi Minh City has 41.9% expecting growth... But there are some localities with low optimism rates, such as Dong Nai only 17.9%, Long An 17.2% and Binh Phuoc 11.8%.

In 2024, the positive point recorded in the PCI 2024 report is that the rate of FDI enterprises selling to state-owned enterprises increased sharply to 18% and sales to government agencies increased to 13.7%, both indexes increased compared to 2023 (the rates in 2023 were 4.4% and 3.3%, respectively). Sales to Vietnamese individuals increased dramatically at 38.6% compared to 23% in 2023; sales to private enterprises were 55% (46.3% in 2023). This reflects the foreign sector's strategy of expanding its retail and service market share in the Vietnamese market being promoted.

Experts say that the improvement in business trends reflects the softening of global trade in 2024 after political tensions and supply chain instability. However, this expectation does not fully reflect the business confidence of FDI enterprises, because from early 2025 until now, trade tensions have become more intense in major economies, and export enterprises are also less optimistic about the export situation in 2025.

A notable point is that the rate of FDI enterprises reporting export activities decreased to 36.5%, a sharp decrease compared to 51.8% in 2023. This reflects the trend of shifting markets and business strategies of foreign investors, focusing on the domestic market when the export market is volatile. However, the survey data of FDI enterprises only stopped at December 2024, so it cannot fully reflect the global uncertainties taking place in the first months of 2025 when trade fragmentation is more widespread.

The positive trend in the PCI 2024 report is that FDI enterprises perceive positive changes in improving the business environment of Vietnamese government agencies. However, enterprises also expressed concerns about the burden of law enforcement costs. Tax-related procedures are at the top of the concerns of FDI enterprises, with up to 35% of enterprises assessing them as cumbersome (in 2023, only 16%); enterprises still have difficulty complying with fire prevention and fighting regulations (15% of enterprises have difficulties, up from 13% in 2023); environmental regulations, land management, etc. are also obstacles for enterprises.

With the caution of foreign investors, experts recommend that in the context of the global supply chain being strongly restructured, Vietnam continues to be in a favorable position to welcome new waves of FDI investment in the future. To maintain this momentum, Vietnam must persevere in deeper institutional reforms, while simultaneously investing in synchronous infrastructure and developing high-quality human resources.

GIA BAO

Source: https://baocantho.com.vn/cai-thien-moi-truong-dau-tu-tao-dong-luc-don-song-fdi-a186815.html