Acceleration Amid Global Uncertainties
Despite the world achieving control over the COVID-19 pandemic, foreign investors remained cautious in their investment decisions throughout the previous year. Factors such as political conflicts, inflationary pressures, and price explosions in various countries, coupled with global challenges like plummeting demand, tightened financial conditions, and unresolved supply chain issues, contributed to a 12% decrease in global FDI capital flows in 2022 compared to the previous year, as reported by the United Nations Conference on Trade and Development (UNCTAD).
Vietnam, traditionally viewed as a beacon in the global economy, experienced a significant drop in FDI in 2022. The Ministry of Planning and Investment's report indicates that total foreign investment capital registered in Vietnam reached USD 27.72 billion, representing an 11% decrease compared to the preceding year. However, the positive signal emerged when realized FDI capital in Vietnam for 2022 reached USD 22.4 billion, marking a 13.5% increase over the same period in 2021.
The cautious trend persisted into the first half of 2023, impacting global investment flows and having a substantial effect on Vietnam. The Foreign Investment Agency's report reveals that in the first quarter of 2023, total registered FDI capital in Vietnam decreased by 19.3% compared to the same period in the previous year. While the situation improved in the second quarter, overall sentiments remained gloomy. However, starting from the third quarter, FDI capital witnessed a sudden and robust inflow into Vietnam.
As of the end of September, total registered FDI capital reached USD 20.21 billion, reflecting a remarkable 7.7% increase over the same period in the previous year. In just three months, an additional USD 6.78 billion was registered. Implemented capital during this period is estimated at USD 15.91 billion, a 2.2% increase over the same period in the previous year, marking the highest in the past five years for the first nine months.
The strong influx of FDI capital continued into the first month of the fourth quarter, with total registered FDI capital exceeding USD 25.76 billion as of October 20. This represents a 14.7% increase over the same period, with an additional USD 5 billion registered in less than one month. The estimated implemented capital for the first ten months of 2023 is expected to reach USD 18 billion, showcasing a 2.4% increase over the same period in the previous year.
With this unexpected acceleration, it is anticipated that by the end of 2023, total registered FDI capital in Vietnam could surpass USD 30 billion, while realized capital may reach a record level of over USD 22 billion. This trend defies global economic challenges and underscores Vietnam's resilience as an attractive destination for foreign investment.
Investors Express Confidence in Vietnam's Investment Environment
At a conference with the foreign direct investment (FDI) business community, Prime Minister Pham Minh Chinh conveyed three key commitments to investors, reinforcing their trust in Vietnam's investment climate. These commitments focus on safeguarding the legal and legitimate rights of investors, offering continuous support to overcome challenges, and maintaining an open, transparent, and equitable business environment.
Prime Minister Chinh assured investors that the government would consistently protect the legal rights and interests of investors, stand alongside businesses in overcoming challenges, and foster an environment where foreign investors can secure long-term benefits and operate stably. Emphasizing the principles of harmony, shared benefits, and risks, he pledged not to criminalize economic and civil relations but to address wrongdoings to ensure a fair, transparent, and sustainable business ecosystem.
According to the Japan External Trade Organization (JETRO), Vietnam continues to be an attractive destination for global FDI, securing its position as Japan's second-largest FDI destination for six consecutive years. JETRO highlighted the positive signs in Vietnam's economy, particularly in the fields of digitalization and information technology. Despite global economic challenges, JETRO experts expressed confidence in Vietnam's potential for strong future growth.
Mr. David Whitehead, Vice President of the Australian Business Association in Vietnam (Auscham), acknowledged the challenges posed by the global context in the first half of 2023. However, he commended the government's coordinated efforts with ministries, branches, and localities to propose flexible policies and implement adaptive solutions. Whitehead emphasized the government's constructive role in enhancing the business investment environment, supporting recovery, adaptation, and development, and addressing difficulties faced by enterprises.
Whitehead highlighted the government's establishment of 12 special working groups, which, together with ministries and localities, promptly addressed challenges and obstacles for businesses. As a result, the macroeconomy remains stable, and inflation is under control. Auscham representatives expressed confidence in the government's commitment to implementing solutions that stabilize the macroeconomy, control inflation, and contribute to creating a stable environment for business activities, making Vietnam an increasingly attractive investment destination.
