According to the Foreign Investment Agency (Ministry of Planning and Investment), in the first 10 months of 2016, FDI invested in 19 sectors. The manufacturing and processing industry attracted the most attention from FDI enterprises, with 842 newly registered investment projects and 691 projects with adjusted capital, totaling US$12,84 billion in newly registered and increased capital, accounting for 72,9% of the total registered investment capital in the first 10 months.
1. An ideal destination
The real estate business sector ranked second with 46 newly approved projects, totaling $982,59 million in newly registered and increased capital, accounting for 5,5% of the total registered investment capital. The professional, scientific and technological activities sector ranked third with $657,66 million, accounting for 3,7% of the total investment capital.
In its 2016 Asian Business Report, UOB stated that among 2.500 Asian businesses surveyed, more than a quarter (28%) chose Vietnam as their ideal location for business expansion in Southeast Asia over the next 3-5 years, second only to Singapore (32%).
In particular, businesses from Malaysia, Thailand, and Singapore showed special interest in the Vietnamese market, with percentages of 38%, 35%, and 29% respectively. Businesses from these three countries are mainly interested in investing in the manufacturing; healthcare and pharmaceuticals; energy and natural resources; and construction and real estate sectors.
According to UOB, the main factors influencing Asian businesses' decision to expand their operations in Vietnam are the stable political and economic environment, the large and growing demand from customers, preferential tax rates and a favorable legal environment, strong connections with local businesses, and government incentives.
Based on these survey results, experts believe that in the next 3-5 years, the energy and natural resources sector, and the construction and real estate sector will be the areas that benefit most from FDI, as Vietnam upgrades its infrastructure to boost economic and social development. Of particular importance is investment in energy infrastructure to meet national needs.
As evidence, in September 2016, UOB Venture Management Pte Ltd (UOBVM), an investment fund under UOB and ORIX Corporation of Japan, announced a $50 million investment in one of Vietnam's largest private hydropower companies, Bitexco Power Corporation.
This investment is related to the General Statistics Office's forecast that nationwide electricity consumption will continue to increase at a rate of 10-12% annually, from 169,8 central hours in 2015 to 615,2 central hours in 2030.
The manufacturing sector also contributes to the national economic development as Vietnam transforms into a major manufacturing hub in Asia. With 54% of Asian businesses citing rising costs as one of their biggest challenges, many companies in the region are looking to Vietnam due to lower operating costs and labor prices.
Leading Asian electronics corporations such as LG and Panasonic have also expanded their manufacturing facilities in Vietnam. The country's demographic characteristics also make it an ideal destination for business expansion.
2. Avoid sacrificing the environment.
According to UOB, with its young population, rising middle class, urbanization, and increasing spending power, Vietnam is becoming attractive to Asian businesses seeking new markets for their products and services.
Thirty-nine percent of businesses surveyed by UOB said they are exploring international market expansion to increase revenue. These companies also include those operating in the healthcare and pharmaceutical sectors, aiming to meet the growing demand and spending power of Vietnamese consumers for healthcare.
According to Eric Tham, Head of Commercial Banking at UOB, Asian businesses that seize opportunities to provide products and services that meet the growing needs of Vietnam's middle class will have a distinct advantage in building strong businesses in the region.
To gain a better understanding of the investment environment in Vietnam and the interests of investors in the region, the Bloomberg ASEAN Summit 2016 will be held in Hanoi on December 8th, with the participation of key leaders of leading regional and global corporations, senior executives of international financial services companies, and government leaders.
This conference is highly anticipated by Asian investors as they look to seize the next phase of development for Vietnam and the ASEAN Economic Community (AEC), especially in cross-border trade and investment within the region.
Growth sectors such as consumer goods, infrastructure, commodities and energy, and banking and finance are expected to be of great interest to investors at this summit.
In discussions with foreign investors, Deputy Prime Minister and Minister of Foreign Affairs Pham Binh Minh affirmed that Vietnam will continue to focus more on investment, but in a direction that promotes environmental sustainability; attracting investment in advantageous sectors, high technology, and efficient use of resources. Vietnam will set conditions to ensure that it attracts investment while simultaneously protecting the environment.
