Vietnam one of ASEAN's top FDI recipients: HSBC

Vietnam continues to be one of the top countries in Southeast Asia for FDI attraction, especially in the manufacturing sector, according to HSBC.

The country has become a rising star in global supply chains, gaining a substantial global market share in many sectors including textiles, footwear, and consumer electronics, the bank noted in a report.

Research shows that new FDI has been flowing into the country since the 2010s, with the lion’s share focused on the manufacturing sector, consistently equivalent for 4-6% of GDP.

Much of the investment initially entered the low-value textile and footwear market. However, Vietnam has climbed up the value chain, growing into a key manufacturing hub for electronics in the last two decades.

Electronics exports hit a new high of $100 billion in 2021, accounting for over 30% of Vietnam’s total exports, up from only 5% 20 years ago.

The creditor attributed much of the success in tech to Samsung’s multi-year FDI in Vietnam, which started in the late 2000s. With an investment of around $18 billion over the years, the company now has eight factories and one research and development center in Vietnam, including two smartphone factories that produce half of its smartphones and tablets.

Samsung's success has prompted other tech giants like Google and LG to relocate their production networks to Vietnam, according to HSBC.

The trend intensified during the U.S.-China trade tensions, which not only lifted Vietnam’s exports but also accelerated FDI inflow. Despite being temporarily disrupted by the pandemic, FDI inflow has remained remarkably resilient, particularly in relation to Apple-connected production, the bank said.

In particular, two Taiwanese Apple suppliers, Pegatron and Foxconn, as well as two mainland Chinese assemblers, Luxshare and Goertek, have all announced substantial investment plans to ramp up production capacity in Vietnam.

HSBC believes that Vietnam’s competitive FDI regime and sound macro fundamentals should continue to attract quality FDI, which is critical to the economy's ability to advance up the value chain.

The country’s tech ambition is beyond a low-end manufacturing hub. This means more reforms, including personnel upskilling and improving infrastructure quality, are needed to grasp the opportunities, it added.

The report showed that total FDI to ASEAN-6, including Singapore, Malaysia, Indonesia, Thailand, Vietnam, and the Philippines, has averaged nearly $127 billion per year since 2010, tripling the preceding decade's average of $41 billion.

Net FDI, or inbound minus outbound direct investment, has averaged nearly $54 billion a year since 2010, almost four times the previous decade’s average.

ASEAN-6 accounted for a record high of around 13% of world FDI inflow in 2020, largely owing to booming flow into Singapore. HSBC believes this trend is likely to continue in the medium term, given ASEAN’s growth outlook remains robust.

The FDI capital registered in Vietnam in the year to June 20, which includes newly-registered capital, expanded capital and capital contribution for stake acquisitions, hit over $14.03 billion, down 8.9% year-on-year.

Of this, the manufacturing and processing sector led the pack with $8.84 billion, accounting for 63% of the entire sum. The real estate sector ranked second with $3.15 billion, or 22.5%.

Foreign-invested project disbursement reached $10.06 billion, a 8.9% increase against the same period last year and a record high in five years.