Conquering the Future: Vietnam - The Promised Land for Foreign Investment in Manufacturing and Processing Industry

In the first two months of 2024, Vietnam attracted over $4.29 billion in foreign direct investment (FDI), marking a 38.6% increase compared to the previous year, with the manufacturing and processing industry leading the way, accounting for 59.1% of the total registered capital. Strategic geographical location, developed infrastructure, supportive policies, competitive labor costs, and development potential are the main factors making Vietnam an attractive destination for foreign investors. Particularly, the manufacturing and processing industry holds significant potential, with numerous M&A deals and high-quality industrial projects currently underway. These factors, along with a favorable investment environment, are driving the sustainable development of the manufacturing and processing industry in Vietnam.

 

The Foreign Investment Agency (under the Ministry of Planning and Investment) has recently released a report on the foreign investment attraction situation in Vietnam in the first two months of 2024.

As of February 20, 2024, the total registered capital for newly established, adjusted, and contributed capital for share purchase or capital contribution by foreign investors reached over $4.29 billion, a 38.6% increase compared to the same period in 2023. The realized capital of foreign investment projects is estimated to have disbursed about $2.8 billion, up 9.8% compared to the same period in 2023.

FDI inflows flowed into 16 out of 21 national economic sectors. Among them, the manufacturing and processing industry took the lead with a total investment capital of nearly $2.54 billion, accounting for 59.1% of the total registered capital and increasing by 16.8% compared to the same period. In terms of project quantity, the manufacturing and processing industry led in both new projects (accounting for 39.2%) and capital adjustment (accounting for 62.3%).

Vietnam has long been known as one of the prominent destinations for foreign direct investment (FDI) in the Southeast Asia region. Major investment partners include Singapore, Hong Kong, Japan, China, and South Korea. Consequently, one of the key sectors that plays an important role in attracting attention and investment from foreign investors is the manufacturing and processing industry. So what are the reasons that make Vietnam a paradise for attracting investment in the manufacturing and processing industry?

1. Strategic geographical location

With its favorable geographical position, Vietnam is not only an important trading hub but also a gateway to large consumer markets worldwide such as China, Japan, South Korea, and Europe. This creates ideal conditions for the development of the manufacturing and processing industry.

2. Developed infrastructure

The Vietnamese government has made significant investments in infrastructure, including seaports, industrial zones, and modern transportation systems such as railways and airways. This helps improve production efficiency and logistics, providing favorable conditions for manufacturing and processing enterprises.

3. Supportive policies and favorable investment environment

 The Vietnamese government consistently promotes supportive policies to attract foreign investment, including improving the business environment, streamlining administrative procedures, and providing tax incentives and financial support to investors.

4. Competitive labor costs

 With a young population and abundant workforce, Vietnam is an attractive market for foreign manufacturers. Labor costs in Vietnam are lower than in some other countries in the region, helping reduce production costs and enhance competitiveness for foreign investors.

5. Development potential

 The manufacturing and processing industry in Vietnam has significant development potential, especially in sectors such as food processing, automobile manufacturing, electronics, pharmaceuticals, and aerospace. In recent years, there have been numerous M&A deals in the food industry, and this trend is expected to continue in the coming years. Notable examples include CJ Group (South Korea) acquiring 65% of Minh Dat Food Company Limited and 47.33% of Cau Tre Export Goods Processing Joint Stock Company; Daesang Corp (South Korea) acquiring 100% of Duc Viet Food Joint Stock Company. Additionally, high-quality industrial projects in strategic sectors are also being implemented, such as the Goodway Vietnam Factory project by Taiwan (China) in Lien Ha Thai Industrial Park (Thai Binh province), producing computer peripherals, with a total investment of $45 million.

Based on these factors, the manufacturing and processing industry in Vietnam is becoming an attractive destination for foreign investors, with immense development potential and sustainable economic benefits.

Thảo Phùng

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