Vietnam's economic outlook for 2022: FDI set to recover some lost ground

Hai Phong leads the way in attracting FDI into Vietnam in 2021. 

FDI into Vietnam fell 1.2 percent year on year in 2021, to 19.74 billion USD, according to the General Statistics Office (GSO). FDI pledges increased 9.2 percent year on year to USD 31.15 billion, indicating the size of future FDI disbursements.

Foreign investors have invested in 18 sectors out of a total of 21 national economic sectors. The processing and manufacturing sectors lead the way with over 18.1 billion USD in total investment, accounting for 58.2 percent of total FDI pledges, followed by industrial production and electric distribution with over 5.7 billion USD in total investment, accounting for 18.3 percent of total FDI pledges. Next is the real estate business, wholesale and retail, with a total registered capital of over 2.6 billion USD and over 1.4 billion USD, respectively. The rest are other industries.

Among new projects, the processing, manufacturing, wholesale and retail, and science and technology sectors attracted the most projects, accounting for 30.7%, 28.1%, and 16.7%, respectively.

In 2021, there will be 106 countries and territories investing in Vietnam. Singapore leads with a total investment of over 10.7 billion USD, accounting for 34.4 percent of total FDI pledges in Vietnam, an increase of 19.1% over the same period in 2020; Korea ranked second with nearly 5 billion USD, accounting for 15.9% of total FDI pledges, an increase of 25.4% over the same period; Japan ranked third with a total registered investment capital of nearly 3.9 billion USD, accounting for 12.5% of total FDI pledges, an increase of 64.6% over the same period.

In 2021, Singapore's investment capital is nearly 2.2 times that of South Korea and more than 2.7 times that of Japan, because Singapore has 01 new investment project and 01 M&A that accounted for over 49% of Singapore's total FDI pledges. Although Korea is only ranked 2nd in terms of investment capital, it is the leading partner in terms of the number of new investment projects, the number of capital-adjusted projects, and the number of M&A. 

VNDirect believed that Vietnam's FDI inflows would recover strongly in 2022 thanks to (1) Vietnam's plans to resume regular international commercial flights from the beginning of 2022, which will create favorable conditions for investors and professionals to return to Vietnam and promote investment in 2022; (2) Vietnam remains an attractive location for companies’ "China1" diversification strategy due to advantages such as competitive labor costs and large demography; and (3) last but not least, Vietnam has signed very progressive free trade agreements (FTAs) with major partners and regions in the world such as CPTPP, EVFTA, RCEP... Therefore, investors in Vietnam will enjoy great tax incentives when exporting products to countries that have FTAs with Vietnam.

"With those advantages, we expect registered FDI into Vietnam to grow by about 9–10% YoY and disbursed FDI to increase by 8–9% YoY in 2022," VNDirect.