Vietnam ready to be significant player on global stage

This rise reflects a dynamic and competitive environment that continues to draw interest from around the world. The processing and manufacturing sector was the largest recipient of foreign direct investment, garnering $17.1 billion, followed by the real estate sector with $5.32 billion. Singapore emerged as the leading investor, contributing $7.79 billion, while the northern province of Bac Ninh became the top location for these investments, securing $4.7 billion.

Meir Tlebalde, CEO Sunwha Kirin Consulting Vietnam

To capitalise on this momentum, Vietnam has implemented legislative reforms aimed at reducing bottlenecks and increasing efficiency in the investment process. By decentralising permitting processes and revising public-private partnership laws, the government is working to simplify bureaucratic hurdles and create a more welcoming environment for foreign investors. These reforms, led by Minister of Planning and Investment Nguyen Chi Dung, are expected to unlock significant capital flows and accelerate infrastructure development, fostering economic growth in various sectors.

Vietnam’s openness to international trade and investment has long been a cornerstone of its economic strategy. This openness is supported by major trade agreements, which provide Vietnamese exporters with stronger conditions in key markets, allowing the country to excel in industries such as machinery, textiles, and agriculture. However, challenges remain, including foreign ownership limits in sectors like oil and gas, stringent licensing requirements in healthcare and IT, and inefficiencies in customs procedures.

Despite these barriers, Vietnam continues to attract investment through policies such as import duty exemptions, accelerated depreciation, and support for research and development. The competitive edge that Vietnam offers to foreign investors is multifaceted. The country boasts a low-cost production base, favourable tax policies, and a young, skilled workforce. These factors have encouraged global giants such as Samsung and Foxconn to expand their operations within the country.

Samsung’s recent investment of $1.8 billion in a new OLED manufacturing plant in Bac Ninh, and Foxconn’s commitment of $551 million to projects in the northeastern province of Quang Ninh, are indicative of the confidence that major companies have in Vietnam’s potential as a manufacturing hub. Such investments boost the economy and enhance its standing as a critical player in global supply chains.

In addition to manufacturing, Vietnam is becoming an attractive destination for high-tech industries, particularly in the semiconductor sector. In 2024, US-based semiconductor companies pledged $8 billion in investments, signalling the country’s growing role in the global tech ecosystem. Vietnam’s semiconductor strategy, which includes financial incentives, research and development support, and the establishment of a national steering committee, aims to position the country as a leader in this critical industry by 2050.

However, the implementation of the global minimum tax (GMT) presents a potential challenge, as it may increase the financial burden on multinational firms unless the country introduces mitigating measures.

Vietnam’s mergers and acquisitions market has also gained momentum, driven by growing interest in industrial real estate, logistics, and renewable energy. In the first nine months of 2024, dealmaking activity reached $3.5 billion, bolstered by infrastructure developments and the expansion of e-commerce. Companies such as Alibaba are investing in data infrastructure projects, reflecting the increasing importance of the digital economy. Similarly, renewable energy projects continue to attract substantial foreign investment, aligning with Vietnam’s commitment to sustainable development and its transition to clean energy.

To support its evolving investment landscape, Vietnam has introduced a range of policies designed to enhance its competitiveness.

The investment law that took effect in 2021 focuses on high-tech industries, renewable energy, and infrastructure development. These sectors benefit from various incentives, including preferential land use, reductions in land rents, and import duty exemptions. Upcoming changes under the Land Law and Real Estate Business Law aim to provide foreign investors with equal operational rights, streamline land acquisition processes, and increase transparency in transactions.

A notable shift in Vietnam’s investment strategy is the move from traditional tax holidays to cost-based incentives, such as support for research and development and accelerated depreciation. This change is driven by the need to comply with global tax standards while maintaining Vietnam’s appeal as an investment destination. The government’s plan to establish the Vietnam Fund for Investment Support underscores its commitment to fostering economic growth by financing infrastructure, fixed assets, and training.

Despite its many strengths, Vietnam faces certain barriers that could deter potential investors. Foreign ownership limits in strategic sectors such as banking, telecommunications, and energy remain a significant challenge. Moreover, complex approval processes for large-scale projects often require reviews by the prime minister or the National Assembly, leading to delays. The implementation of the GMT adds another layer of complexity, as companies must meet a 15 per cent tax rate, along with additional top-up taxes to align with global standards.

Nonetheless, Vietnam’s proactive approach to reform and its commitment to creating a business-friendly environment are setting the stage for sustained investment growth. By balancing national security interests with economic openness, the nation is building a solid foundation for attracting foreign direct investment while safeguarding long-term economic stability.

Vietnam sees increase in FDI in the first 11 months of 2024 Vietnam reported more than $31 billion in foreign direct investment (FDI) in the first 11 months of the year, an on-year increase of almost 1 per cent, according to data from the Foreign Investment Agency (FIA) under the Ministry of Planning and Investment.