Vietnam’s 2023 FDI inflow likely to trump 2022 as investors gain confidence

Inbound foreign direct investment (FDI) in Vietnam this year is likely to surpass 2022 figures as operational overseas businesses recover and expand operations, according to KB Securities Vietnam JSC (KBSV).

FDI inflow drivers are both domestic and external, Hanoi-based KBSV, a member of South Korea’s KB Securities and KB Financial Group, says in its latest macroeconomy report.

Domestically, the Vietnamese government continues to issue business-friendly policies, while the country possesses competitive edges like stable polititics, favorable geography, a large number of free trade deals, and abundant workforce.

On the external front, Vietnam is benefiting from a shift of factories out of China. A more stable Vietnamese dong compared to the Chinese yuan also helps buoy investor confidence in the country’s business environment.

Moreover, a headline-making double upgrade of the Vietnam-U.S. relationship to a comprehensive strategic partnership will likely lure more investment from the world’s largest economy, the brokerage house adds.

A modest rebound of EuroCham's Business Confidence Index in the third quarter indicates the firm confidence of European firms in Vietnam and an emerging positive, economic momentum.

A notable 63% of businesses in a recent survey have positioned Vietnam within their top 10 FDI destinations, the report notes. Among them, 31% have ranked Vietnam among their top three choices, while an impressive 16% have chosen it as their foremost investment destination.

Reflecting this confidence, over half of the survey respondents plan to increase their foreign direct investment in Vietnam by the end of the year, according to the EuroCham survey results released last week.

FDI commitments in Vietnam fell 11% year-on-year to $27.72 billion in 2022 despite a rise in the number of new projects. Disbursement rose 13.5% to $22.4 billion, government data shows.

Foreign investors committed to pour $20.21 billion into Vietnam in the year to September 20, up 7.7% year-on-year while FDI disbursement increased 2.2% to $15.91 billion. Manufacturing remained the top sector in attracting FDI pledges.

“New FDI commitments reflect continued confidence by foreign investors in Vietnam’s potential despite global uncertainties,” the World Bank in Vietnam said Tuesday.

“In addition to investors’ continued confidence in Vietnam’s long-term development potentials (despite short-term global uncertainty), Vietnam seems to also benefit from the “China+1” investment strategy,” the bank added.

In January, the Foreign Investment Agency under the Ministry of Planning and Investment predicted FDI commitments at $36-38 billion this year, with disbursement reaching $22-23 billion.