Advantages that help Vietnam become the strongest FDI "magnet" in Southeast Asia

(Dan Tri) - According to Global Finance, among Southeast Asian countries, Vietnam possesses countless factors to become a favorite investment destination for FDI capital flows.

"Magnet" attracting FDI

Vietnam has the advantage of a young population, with people under 25 accounting for about 40% of the population. Therefore, Vietnam's demographics become an advantage in the context of an increasingly aging world population.

In addition, labor costs in Vietnam are quite low, the workforce is large and highly educated. With its geographical location next to China, Vietnam has easy access to the country's market of 1.2 billion consumers.

At the same time, because it is part of the ASEAN group, Vietnam also has the advantage of accessing the tariff-free market for essential goods in the Southeast Asian region with a population of about 800 million. This position is also achieved thanks to Vietnam's adoption of many policies friendly to foreign investors.

Vietnam also has the advantage of accessing the tariff-free market for essential goods in the Southeast Asian region with about 800 million people (Photo: Hoang Giam).

Speaking to Global Finance , Mr. Thierry Mermet, CEO of Source Of Asia - a consulting organization for companies looking for business opportunities in Vietnam and ASEAN - commented that the 2023 outlook for the business environment in Vietnam shows promising signs of improvement.

Foreign direct investment capital reached about 10 billion USD in the first quarter of this year, up 0.5% over the same period in 2022.

The Source Of Asia leader predicts this trend will continue: "Our forecast for the next quarters is also very positive. Companies are really expecting to receive similar levels of foreign direct investment pouring into Vietnam in the coming time."

"In the long term, Vietnam is really strengthening its position as one of the top three places where European business leaders want to invest , " the expert emphasized.

Attractive destination

According to the business confidence index report conducted by the European Chamber of Commerce in Vietnam (EuroCham), an additional 3% of business leaders chose Vietnam as one of the top 3 investment destinations.

In the first half of this year, 90 countries and territories invested in Vietnam. Of these, the five countries investing the most are Asian countries, with South Korea leading with a total FDI capital of 81 billion USD. Singapore and Japan follow, with total FDI capital invested in Vietnam of 72 billion USD and 70 billion USD, respectively.

Notably, although the US ranks 7th, it is Vietnam's leading export partner with a trade turnover of 110 billion USD in 2022.

Mr. Thierry Mermet cited Thomson Medical Group - one of Singapore's largest private healthcare providers - spending 381.4 million USD to acquire FV Hospital in Ho Chi Minh City.

"This deal not only marks Thomson's presence in the Vietnamese market but also helps the country take advantage of growing healthcare service opportunities from neighboring countries," the expert said.

In the first half of this year, 90 countries and territories invested in Vietnam (Photo: Nam Anh).

Another sign of Vietnam's appeal is that electric car maker VinFast has recently become the world's largest automaker by market capitalization, behind only giants like Tesla and Toyota.

Barry Elliott, vice president of Tomkins Ventures, a long-time supply chain expert in Vietnam, said that this not only signals a promising future for the electric vehicle industry in Southeast Asia in general, but also demonstrates Vietnam's emerging manufacturing capacity.

Not only that, experts also believe that Vietnam has also benefited greatly from the US-China trade war. The US's move to impose higher tariffs on many Chinese exports has pushed many of their production lines from China to alternative centers in Asia.

“This trend has been further reinforced by the Covid-19 pandemic, as prolonged disruptions have created chaos in global supply chains for many industries, including automotive and electronics,” said Barry Elliott.

The Japanese government has fueled this trend in 2020 by introducing a subsidy program for Japanese companies to move production out of China, back to Japan or to a number of other countries.

Continue to attract investors

"Since 2020, Vietnam has been one of the favorite destinations for Japanese companies when they choose to move production to the ASEAN region and this trend will continue," Tomkins Ventures vice president told Global Finance .

Recently, Ms. Jacqueline Poh, CEO of the Singapore Economic Development Board, met with startups in the fields of financial services, robotics and renewable energy. She said that Vietnamese businesses are courageous and have a spirit of supporting each other.

“This powerful combination has created a favorable local startup ecosystem. The 14 Vietnam-Singapore Industrial Parks (VSIPs) have now attracted US$18.7 billion in investment and created 300,000 jobs in Vietnam,” she shared.

According to Carsten Ley, CEO of consulting firm Asia PMO, not only Japanese companies but also many Korean companies are investing heavily in Vietnam. Not only that, Apple has also moved its AirPods production line from China to Vietnam and Lego has just started construction on a giant factory in Binh Duong.

According to the Asia PMO leader, Vietnam is moving up the value chain from footwear and apparel to the high-tech sector. Vietnamese fintech companies are thriving such as Momo, ZaloPay, VNPay or foreign startups.

Vietnam is moving up the value chain from footwear and garments to high-tech sectors (Photo: Tien Tuan).

“Capital spending is expected to grow rapidly, reflecting continued strong growth in foreign direct investment by multinational companies as well as domestic infrastructure spending,” Carsten Ley told Global Finance .

He also said that Vietnam is becoming more and more attractive in the eyes of foreign investors and it is not surprising that venture capital funds are more present in Vietnam.

Ms. My, President of Jungle Ventures, said that venture capital funds in Vietnam come from all over the world, with increasing interest from the West, including the US.

However, she also pointed out many challenges in investing in the Vietnamese market.

Specifically, according to her, the legal framework, especially for financial services, is very complicated. There are many restrictions on foreign ownership, such as in the insurance sector. In addition, language and communication are still considered a barrier.

However, despite the above series of challenges, the Chairman of Jungle Ventures Venture Capital Fund is still confident and affirms: "The best is yet to come".

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