Replenishing FDI flows into Vietnam
Joonsuk Park, HSBC Vietnam’s head of international subsidiary banking, wholesale banking, says the intra-Asian investors have a keen understanding of the Vietnamese market. Therefore, it may be opportune timing for Vietnam to focus its efforts on attracting more of the intra-Asian FDI flows.

No doubt, foreign direct investment flows into Vietnam play a quintessential role and contributes to the growth story of the country. FDI has been one of the key catalysts spurring and transforming Vietnam into one of the most open economies in the region.
The world has witnessed Vietnam's transformation across progressive regulatory changes, infrastructure modernization, the formation of a characteristic supply chain manufacturing ecosystem, and the emergence of an entrepreneurial young generation of talents leading the country into a digital era quantum leaping the analog stage of the economy that most countries have had to go through.
Today, the country has successfully emerged as a leading frontier market in Asia and an export-led economy. Multinational companies as well as local exporters have the privilege of securing a highway pass enabling access to 15 of the G20 markets. The Vietnamese government has actively sought to embed FTA execution as a key instrument to lay that platform very conducive to the country’s export growth. Vietnam currently has 15 FTAs and multiple regional pacts including the RCEP and CPTPP.
The efforts are even more pronounced knowing that Vietnam was committed and pulled through to execute key FTAs including the UK-Vietnam, RCEP and CPTPP all in the midst of Covid-19. The country's domestic consumption market is in parallel another important arena for the incoming multinational companies. An HSBC study shows that by 2030, Vietnam’s domestic consumption market will outsize the markets of Thailand, the UK as well as Germany.
The FDI investors or those regional and global multinational companies operating in Vietnam effectively contribute to over 80% of the total exports out of Vietnam and more than 25% of local investments. Of those multinational companies, the intra-Asian multinational companies compose the bulk.
Vietnam’s top exports include mobile, electronic goods, general machinery, apparel, footwear, wooden products, etc. and of all of these sectors, the Asian multinationals across namely South Korea, mainland China, Hong Kong, Taiwan, Japan, Thailand and Singapore play an integral part. The value of attracting the intra-Asian multinationals also translates into Vietnam stepping up not only in the value-add ladder in terms of export products but concurrently in expanding the depth and breadth of the domestic consumption market. These top intra-Asian investors continue to maintain their focus on Vietnam.
Following and supporting the flow of intra-Asian capital flow as part of our pivot to Asia strategy, HSBC has been providing advisory and treasury support to many multinational companies entering and operating in Vietnam and we are pleased to see the annual investment in-flows remain steady.
Already coming into 2023, we have witnessed interest from a number of global intra-Asian multinationals engaging across a wide array of sectors including retail, semiconductors, electronics, mobile parts, plastics, renewables, logistics, etc., looking to either expand or invest newly into the country. During our recent meetings and events with our Thai clients and investors, we see there is vigor, excitement and confidence in how they are looking to further expand and invest across feed mill, packaging, retail, manufacturing and chemicals sectors on the back of mid long term growth prospect in a market fraught with the right elements for growth.
However, as is the case for many countries and markets, Covid-19 has also impacted Vietnam in one way or another. Looking at newly registered FDIs in the country, Vietnam experienced a roughly 25% drop from 2019 to 2020. In 2021, the numbers remained flat in 2022, the investments further slightly deteriorated.
There are multiple reasons behind this. Covid-19 had clearly delayed investment decisions for many multinational companies globally. Early opening up of the country at the end of 2021 has not immediately led to FDI inflows. Investment planning and decision simply take time not to mention that Vietnam has also become more selective to attract higher value-added investments as opposed to the indiscriminate past.
Added to these complications, heightened geo-political risk, rising inflationary pressure, the rising cost of borrowing and global trade slowdown is further weighing down on the investment decisions of the regional and global multinational treasurers and CFOs. Irrespective, the mid to long-term view remains solid. Many prospective and existing FDI investors harbor the view that Vietnam will continue to benefit owing to an established manufacturing ecosystem in place, cost competitiveness, a rising number of skilled workers, progressive regulatory support, affluence and the growing middle-income story as well as from the China+1 leverage.
HSBC forecasts that Vietnam’s GDP will grow by 5.8% in 2023. Nevertheless, headwinds remain strong.
The global trade recession impacts Vietnam’s exports, the elevated inflation deters domestic consumption and whilst the re-opening of China is expected to positively impact Vietnam across FDI inflows, exports and receipt of tourism, it will be a challenging year.
Consequently, replenishing the FDI flow back into Vietnam is of critical importance for both export and domestic consumption market growth. And the intra-Asian flow cannot be underestimated.
The intra-Asian investors have a keen understanding of the Vietnamese market from both a cultural and business practice perspective. The geographical proximity allows for the ease of travel for those Head Office decision-makers. And many of the Asian markets themselves are export-oriented and hence understand the innate advantage of leveraging Vietnam’s rich FTA platform.
The growing middle income and wealth story in Vietnam also underpins their efforts to further penetrate the local domestic consumption market. Whilst the Western multinationals battle with macro-economic challenges and geopolitical tensions, it may be an opportune timing for Vietnam to focus the efforts on attracting more of the intra-Asian FDI flows into the country.
Multiple measures can be placed in to replenish the FDI flows and many efforts are already in progress. The mandate will then be to double up on the execution pace which will lead to investor confidence across the wide range of regulatory frameworks. Vietnam is clearly on a transition journey to stepping up into an emerging market status. An active inflow of FDI investments will support speeding up that journey.
Fortunately, the latest February PMI shows a rebound back up to 50 points signaling the recovery of new export order demand. Let’s now welcome the intra-Asian FDI flow - the Vietnam way, with energy and entrepreneurial spirit.
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