Chu Hai Van, deputy general director, Industrial and Construction Statistics Department, General Statistics Office
2021 has been a particularly challenging year for the Vietnamese economy. Foreign investment attraction, however, still reached $26.46 billion in the first 11 months, a slight increase on-year. What is your take on the situation?
This means foreign investors still trust Vietnam’s economic rebound after two years of slower economic growth. Since the start of 2021, production and business activities, particularly in the foreign-invested sector, were critically affected by COVID-19, particularly from May to the end of September. However, the volume of foreign investment did not drop, showing that foreign investors are confident in Vietnam’s economic development trajectory, as well as the government’s pandemic control strategy.
Foreign investors’ trust has been maintained as the government, ministries, departments and local governments have been constantly supporting their development through a raft of measures and mechanisms even during the most challenging times.
What are the highlights of foreign investment attraction so far this year?
In the first 11 months, the number of small foreign investment projects having a total investment value below $5 million dropped 35 per cent, leading to a dwindling number of newly-licensed projects. Total registered investment volume, however, rose 3.76 per cent and supplemental capital value jumped 26.7 per cent, showing that attracted projects are growing in size. This can be seen in projects such as a $3.1 billion LNG power project, the $2.15 billion LG Display project, the more than $1.31 billion O Mon thermal power plant, or the $611.4 million Kraft Vina paper production project.
|The manufacturing and processing sector continued to take the lead, drawing in more than $14 billion in total capital, holding 53 per cent of total registered capital value. |
The improved quality of foreign investment projects was also reflected in the field the new projects are invested. In previous years, the real estate sector often came second in foreign investment attraction. In the 11 months this year, this sector slid to the third position. Accordingly, the manufacturing and processing sector continued to take the lead, drawing in more than $14 billion in total capital, holding 53 per cent of total registered capital value.
Power production and distribution came second, attracting more than $5.7 billion, or 21.6 per cent of the total. This comes on the back of the government policy to attract larger foreign investment projects generating more added value.
Meanwhile, there has been a 40.4 per cent reduction in the number of foreign indirect investors and a 33 per cent drop in capital going into stake purchases during the period. What is the reason behind this?
The pandemic was leaving critical impacts on the mergers and acquisitions (M&A) market both globally and in Vietnam. For M&A deals, investors usually directly survey the market and businesses they intend to cooperate with. Pandemic-driven travel limitations have significantly affected their investment decisions.
Another reason is that last year Vietnam had witnessed many sizable M&A deals, making this year's M&A scene seem less vibrant.
Basically, most Vietnamese people have received two shots of COVID-19 vaccines; many countries are in a similar situation. Countries have begun to relax air travel and Vietnam is also proactively opening airways and gradually loosening entry requirements for foreigners. I believe there will be a recovery in both the number of foreign portfolio investors as well as capital going into stake purchases and capital contributions in 2022.
What are your expectations for foreign investment attraction in 2022?
Foreign businesses in Vietnam are mostly producing for export. From the outset of this year until mid-December, Vietnam raked in $633.2 billion in total export-import value, a nearly 23 per cent jump on-year. The export-import turnover of the foreign-invested sector alone soared nearly 25.4 per cent, reaching $89.23 billion, in which export value amounted to $232.2 billion, representing over 73 per cent of Vietnam’s total export value.
This means that amid the difficulties, foreign businesses have still managed fair growth. As difficulties abate, business activities, as well as people, have gradually adapted to the new normal. Foreign investment flows will continue to find their way into Vietnam as the country’s advantages have remained intact.