Upbeat outlook for FDI inflows for the rest of 2022

O Mon II thermal power plant in Can Tho city is expected to create a breakthrough for the local economy. 

In March 2022, the pace of FDI project implementation continued to pick up, with disbursed capital growing 8.7% year on year to $1.7 billion. The implemented capital of FDI projects increased 7.8% year on year to US $4.4 billion in 1Q22. On the other hand, FDI project pledged capital slowed in March 2022, totaling US $3.9 billion (-16.1 percent yoy).

Pledged capital for FDI projects fell 12.0% year on year to US $8.9 billion in 1Q22.To be more specific, 322 (37.6% yoy) newly licensed projects in 1Q22 with a pledged capital of US $3.2 billion, a decline of 55.5% in terms of registered capital compared to the same period in 2021; 228 projects licensed in the previous years approved to adjust investment capital (incremental FDI) with a total additional capital of US $4.1 billion (93.3% yoy); and 734 turns of capital contribution and share purchases of foreign investors with a total value of US $1.6bn, a surge of 102.6% over the same period in 2021.

The decrease in pledged FDI in the first quarter of 2022 was primarily due to the fact that a very large-scale project, the Long An I and II liquefied natural gas (LNG) power plants worth US $3.1 billion and the Omon II thermal power plant worth US $1.3 billion, was completed in the same period last year. Meanwhile, Lego's toy factory, costing US $1.3 billion, is the largest pledged FDI project in the first three months of 2022.

The number of newly licensed projects surged considerably in 1Q22, indicating that foreign investors continue to have a good outlook on the macro-outlook and business environment in Vietnam. VNDirect expects pledged FDI to recover in the next quarters as Vietnam advances its economic liberalization.

Many experts anticipated that enacting Resolution No. 128/NQ-CP on safe COVID-19 pandemic adaptation would help enterprises and the economy recover, and that international investors would be more confident in investing in Vietnam. When economic operations were reopened in the next months, FDI inflows were expected to surge.

However, as countries sought foreign resources to help them restore their economies in the face of limit ed capital supply, competition for FDI increased.

As a result, analysts believe that an emphasis should be placed on revising foreign investment policies to ensure that they are acceptable for global economic development and adjustments in strategies to attract FDI from countries throughout the world. Furthermore, a robust corporate environment would be a significant factor.

Furthermore, the government needs to create regulations and standards to serve as a new filter for selecting capable international investors with innovative, environmentally acceptable technologies for long-term development. In the framework of Industry 4.0, Vietnam should concentrate on improving human resources in order to meet the demands of foreign investors.

Despite the numerous hurdles in securing FDI inflows this year, VNDirect has maintained its forecast from the beginning of the year that pledged and implemented FDI will expand by 10% yoy and 9% yoy, respectively, in 2022, compared to last year.