Vietnam’s FDI outlook appears more promising in 2H22

The Lego toy factory, with a USD 1.3 billion value, is the largest registered FDI project in 2H22.

>> FDI remains bright spot in Vietnam’s economy

The implemented capital of FDI projects reached USD 5.6 billion, up 9.7 percent yoy in 2Q22, according to the Ministry of Planning and Investment (MPI), bringing the implemented capital of FDI projects in 1H22 to USD 10.1 billion, up 8.9 percent yoy (vs. a 6.8 percent increase in 1H21).

The pledged capital for FDI projects, on the other hand, remained low in 2Q22 at USD 5.1 billion (-0.4% yoy). The pledged capital for FDI projects fell by 8.1 percent year over year to USD 14.0 billion for 1H22.

More specifically, there were 1,707 (-8.0 percent yoy) turns of capital contribution and share purchases, 752 (-6.5 percent yoy) newly licensed projects, 487 (5.9 percent yoy) projects approved to adjust investment capital (incremental FDI), and 487 (5.9 percent yoy) projects licensed in the prior years. There were 1,707 (-8.0 percent yoy) projects licensed in the previous years.

The Long An I, II liquefied natural gas (LNG) power plant worth US$3.1 billion and the Omon II thermal power plant worth US$1.3 billion were two very large-scale projects that were recorded during the same period last year. This is primarily what caused the decline in pledged FDI in the first half of 2022. The Lego toy factory, with a USD 1.3 billion value, is the largest registered FDI project in 2H22.

The FDI Confidence Index (FDICI) will likely increase in 2022, according to Mr. Tran Duc Anh, Head of Market & Strategy at KB Securities, for the following reasons.

First, since March 15, 2022, Vietnam has fully reopened international trade, creating the ideal conditions for foreign experts to enter the country to conduct research and sign contracts as well as accelerating backlogged projects under the adverse effects of Covid lockdowns and the suspension of international flights in 2020–2021.

>> Vietnam’s process manufacturing attractive to foreign investors

Second, a number of signed FTAs, a desirable geographic location, a large and inexpensive labor pool, financial assistance programs, etc. all contribute to Vietnam's continued appeal as a travel destination.

As Vietnam speeds up its economic reopening and numerous foreign lines restart operations, Mr. Dinh Quang Hinh, analyst at VNDirect, expects the committed FDI to rebound in the ensuing quarters. Additionally, due to its competitive labor costs, close proximity to China, and political stability, Vietnam continues to profit from global multinational corporations' "China1" strategies and diversification into the country. The biggest technology companies in the world are planning to relocate some of their production lines to Vietnam soon. For instance, APPLE intends to manufacture the iPhone and iPad there. XIAOMI and OPPO, two titans of Chinese technology, also plan to establish manufacturing operations in Vietnam.

"We uphold our early-year prediction that pledged and implemented FDI inflows in 2022 will increase by 10% yoy and 9% yoy, respectively, over the previous year. It should be noted that FDI inflows into Vietnam dramatically declined in the third quarter of 2021 as a result of numerous provinces and cities having to impose blockades to stop the spread of the COVID-19 pandemic's fourth wave”, said Mr. Dinh Quang Hinh.