Why Foreign Investments Are Flocking-In to Vietnam
For the past two years, Vietnam has proven its potential as one of the most lucrative countries in Southeast Asia to do business in with its steady GDP growth and growth in direct foreign investments amounting to almost US$2.5 billion in the first 9 months of 2016.
Despite the decline on the agricultural front, Vietnam has emerged on top in the manufacturing sector with foreign business flocking in Hanoi’s industrial zones for its factories, and I.T. corporations setting-up their presence everywhere in the country for the past two to three years.
According to the report of the British Business Group Vietnam (BBGV) on September 26, 2016, “Although GDP growth for the year is a little under budget for 2016, Vietnam is still the leading one of the top countries in SE Asia for GDP growth, and ahead of Thailand, Indonesia, Philippines, Malaysia and Singapore (commonly referred to as the ASEAN 6). Whilst lower oil process and depressed agricultural output because of changes in climatic conditions have depressed growth, manufacturing output has grown robustly and confidence is strong buoyed by increased foreign direct investment.”
BBGV has also indicated other success factors that include the significant increase in foreign direct investments in 2016 as compared to 2015 at US$ 15 billion as of September; a 10% increase in exports on 2015; and a trade surplus of US$ 2.5 billion compared to a deficit of US$ 3.7 billion in the first 8 months of this year. It is also projected that export growth will continue in 2017 because of expected inbound investments resulting from the AEC and EU Vietnam FTA that will be implemented in January 2018, as well as the pending approval of the TPP agreement after the local elections.
Even foreign exchange reserves are high with US$ 40 billion that ensures the safety level of imports plus the trade surplus helped strengthen and stabilize the VND/US$ exchange rates. Furthermore, Vietnam has been named as one of the World’s Top 20 Manufacturing Locations in Deloitte’s 2016 Global Manufacturing Competitive Index.
Global businesses have shifted to Vietnam mainly because of the following:
• Low Manufacturing Costs
• New Foreign Trade Agreements Signed
• 100% Foreign Ownership of Businesses Now Allowed
VN Express International reports on August 22 that it is the low cost of manufacturing in Vietnam that lures foreign companies to move to Vietnam. Even in the report from the United Nations Conference on Trade and Development, it clearly shows that global investors are still looking on “emerging Asian countries” for business with a US $541 billion in foreign investments generated for Asia in 2015.
As compared to previous years, global companies have shifted from China to Vietnam due to high labor costs and geopolitical concerns in the former business hub.
Barriers to entry in the Vietnam business community have been alleviated by global corporations through mergers and acquisitions evident from the increase in foreign shareholders in more than 1,700 local companies from 2015 to 2016. These has also been made feasible via the new Foreign Trade Agreements that the Vietnam government has signed with other nations together with the lifting of the 49% limit to foreign business ownership in the country and allowing them a 100% stake even for listed companies in various sectors: consumer, property, transport, construction, manufacturing, financial services and agriculture.
Vietnam has very well prepared for the influx of foreign business investors with its modern public roads and office infrastructure including instant office solutions like premium serviced offices offered by professional companies like CEO SUITE which has complete and ready for use private offices, meeting rooms, business lounges with five-star quality staff support system at the iconic Lotte Center in Hanoi, the country’s capital.
Nov 03, 2016