Foreign direct investment inflows into Vietnam are expected to spike in the coming months thanks to the new legal investment framework and free trade agreements in effect.
According to industry insiders, the signing of the Trans-Pacific Partnership (TPP) will encourage more international groups to invest in Vietnam. The existing obstacles in the TPP negotiations are hoped to be solved, allowing the TPP to be signed.
Kim Young Sun, secretary general of the Korea-ASEAN Centre, said that the Republic of Korea was now the biggest foreign investor in Vietnam, with the total registered capital of over US$39 billion. He predicted that the figure would continue to increase in coming years, thanks to the recently-signed free trade agreement (FTA) between Vietnam and the Republic of Korea. This FTA is considered a catalyst for bilateral economic cooperation in the future.
To grasp the FTA opportunities, many international businesses, including those from the Republic of Korea, have visited Vietnam to study the possibilities of investing in the market.
A few days ago, the Tokyo- headquartered Creed Group signed a deal investing US$200 million in An Gia Investment for tapping in the Vietnamese real estate company. Meanwhile, Citibank is gearing up its plan to establish a 100% foreign owned bank in Vietnam, following an official Letter of Acceptance signed by Governor Nguyen Van Binh.
In a similar move, the US-based Jabil has plans to expand its operations in Ho Chi Minh City with the investment capital of US$500 million. Having established a presence in the city since 2007, Jabil has already invested a significant sum in its business expansion, which has increased its local revenue by 50% annually over the past five years. As of June 2015, the US firm exported an accumulated US$1.3 billion worth of hi-tech products from Vietnam.
In late July, a potential investor also officially submitted a large project to Vietnamese authorities. If it is approved by the government, industry insiders speculate that some billions of US dollars will be poured into the country.
According to the monthly statistics released by the Ministry of Planning and Investment’s (MPI) Foreign Investment Agency, from early this year to July 20, Vietnam had 1,068 newly-licensed projects with the total newly-registered capital of US$6.92 billion, up 1% year-on-year. This was a remarkable recovery in this statistic for Vietnam considering the fact that the country saw an on- year fall of 30% for this year’s first half, with just US$3.84 billion in the total newly-registered capital.
The MPI attributed this huge investment capital spike in July to a number of newly licensed large-scale foreign invested projects during the month, worth over US$3 billion in total, including the US$1.2 billion Empire City project developed in Ho Chi Minh City by Tien Phuoc and Tran Thai property developers, and the UK’s Denver Power Ltd, Taiwan’s Polytex Far Eastern’s US$274 million garment project in the southern province of Binh Duong, Regina Miracle’s US$88 million footwear plant in VSIP Hai Duong in the northern province of Hai Duong, and the Vietnam-Singapore Industrial Park Joint Venture Company’s US$76 million industrial-urban-service park in the central province of Nghe An.
Although it is too early to confirm the effectiveness of the new laws on Investment and Enterprises, which took effect on July 1, many foreign investors shared the view that these laws would create more favourable investment conditions, and contribute to an increase in foreign direct investment inflows in the near future.