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- Vietnam’s FDI and GDP figures suffered and dropped barely in 2021, because of stringent lockdowns and motion restrictions brought on by the pandemic.
- However, Vietnam nonetheless recorded a constructive GDP, and with the nation slowly reopening, financial prospects are shiny for 2022.
- Vietnam Briefing appears at FDI figures for 2021, which industries had been impacted, and the outlook for 2022.
Vietnam suffered a difficult and making an attempt 2021, because of strict lockdowns and motion restrictions for nearly half the 12 months in 2021. This resulted in a major financial downturn, inflicting job losses and companies closures. It furthered added to provide chain snarls, affecting international MNCs as demand in western markets peaked because of manufacturing facility closures and strict quarantine necessities.
However, Vietnam nonetheless recorded a constructive GDP development price of two.58 % and now appears poised to return to its typical 6 % annual development price in 2022 as the federal government step by step reopens the nation. Vietnam’s authorities deserted its zero covid strategy final 12 months, transferring to a ‘stay with the virus’ strategy permitting companies and manufacturing crops to renew operations.
FDI maintains constructive scorecard however pandemic dampened excessive scores
The newest figures by Vietnam’s Ministry of Planning and Funding (MPI) give an summary of Vietnam’s FDI for 2021.
As of December 20, 2021, international funding tasks disbursed US$19.74 billion a slight lower by 1.2 % over the identical interval in 2020. Nonetheless, the entire newly registered, adjusted, and paid-in capital for share buy by international traders reached US$31.15 billion or 9.2 % larger than the identical interval final 12 months.
Out of this, there have been 1,738 new tasks which had been granted funding registration certificates, a year-on-year enhance of 31.1 %. Thus, whole registered capital reached over US$15.2 billion.
As with earlier years, manufacturing and processing led with whole funding capital of US$18.1 billion and accounted for 58.2 % of whole registered funding capital. Whereas electrical energy manufacturing and distribution attracted a small variety of new tasks, they had been large-scale, and thus ranked second with an funding capital of US$5.7 billion and accounting for 18.3 % of whole registered funding capital. This was adopted by actual property and wholesale and retail at US$2.6 billion and US$1.4 billion respectively.
Asian international locations lead FDI
106 international locations invested in Vietnam in 2021. Much like final 12 months, Asian international locations represented the lion’s share of FDI into Vietnam. Singapore led, accounting for greater than 34.4 % of whole funding capital, and up 19.1 % in comparison with the identical interval. This was adopted by South Korea at US$5 billion, Japan with US$3.9 billion, adopted by China, Hong Kong, and Taiwan. Japan piped China to 3rd place rising its funding in 2021.
This is also partly because of current authorities incentives by Japan to diversify its provide chains and likewise carry again manufacturing to the nation. Vietnam stays a good vacation spot for Japanese producers. Aside from funding from companies reminiscent of Toyota, Honda, Canon, Suzuki, Marubeni, and Mitsui, Japanese corporations are additionally eyeing the retail sector with Meji eager on increasing operations. Muji, Matsumoto Kiyoshi, and Miki Home have additionally opened shops in main cities in Vietnam.
By way of the variety of FDI tasks, South Korea topped the checklist, adopted by Japan, Singapore, Taiwan, and Hong Kong.
This wide selection of sectors signifies a variety of doable sources of Vietnam’s FDI competitiveness. The domination of the manufacturing and processing sector displays the effectivity features supplied by Vietnam to international companies. An rising variety of companies have shifted their manufacturing operations to Vietnam or have adopted a China+1 mannequin.
Hai Phong tops FDI checklist
Hai Phong topped the checklist with whole registered funding capital of US$5.26 billion surpassing Lengthy An province from final 12 months and accounting for 16.8 % of the entire funding capital. Lengthy An thereby got here in second with US$3.84 billion adopted by Ho Chi Minh Metropolis, Binh Duong, Bac Ninh, and the capital Hanoi.
This 12 months Hai Phong led the checklist partly because of the LG Show Venture by South Korean traders with funding capital adjusted to extend by about US$2.15 billion. Hai Phong has additionally granted funding licenses to 5 tasks together with three foreign-invested ones value US$140 million. Different main FDI tasks throughout the nation embrace the LNG Energy Plant Venture in Lengthy An by Singaporean traders, a thermal energy plant venture in Can Tho, and a paper manufacturing facility in Vinh Phuc by Japanese traders.
Essential to notice that international traders are nonetheless targeted on investing in larger cities which have good infrastructure as proven by the variety of tasks. Whereas Hanoi didn’t make it within the high 5, it nonetheless ranked second within the variety of new tasks.
Import and exports confirmed robust resilience regardless of manufacturing facility shutdowns and lockdowns
Exports in 2021 elevated within the first 11 months of the 12 months. Exports reached round US$246.7 billion, up 20.7 % in comparison with the identical interval final 12 months and accounting for 73.6 % of export turnover. The US remained Vietnam’s largest importer in 2021 with an import worth of over US$96.2 billion up 24.9 % 12 months on 12 months.
As we noticed, demand for electronics reminiscent of computer systems and cell phones skyrocketed throughout the pandemic serving to Vietnam’s exports. The US imported smartphones and equipment from Vietnam value round US$96.2 billion rising by 10 % 12 months on 12 months. The US was additionally Vietnam’s largest importer of computer systems and digital merchandise with a price of US$12.7 billion. Aside from this, the US imported equipment and tools and likewise took the lead in attire imports from Vietnam at US$16.1 billion contributing to Vietnam’s GDP.
Imports of the international funding sector had been over US$218.3 billion up by 29.2 % over the identical interval final 12 months. The FDI sector had a commerce surplus of round US$28.5 billion.
Manufacturing more likely to appeal to FDI, help economic system in 2022
After recording a unfavorable GDP in Q3 of 2021 and experiencing a contraction in manufacturing, Vietnam’s manufacturing rebounded and expanded from This autumn 2021. As per IHS Markit, Vietnam’s Buying Managers Index (PMI) elevated to 52.5, a slight enhance from 52.2 in November, however however, displaying improved enterprise circumstances. A rating of fifty or extra signifies enlargement in manufacturing. New orders continued to extend on the finish of the 12 months, whereas exports orders additionally elevated in December to an eight-month excessive.
Whereas a scarcity of labor and the pandemic stunted the trade, manufacturing output continued to extend as Vietnam additional opened its economic system. This underlines Vietnam’s place as a producing hub. Regardless of restrictions and manufacturing facility closures, international traders proceed to stay constructive on Vietnam’s future prospects.
2022 Outlook
Vietnam is anticipated to proceed to most important sturdy FDI funding in 2022. The federal government has forecast a GDP of 6 to six.5 % for 2022. Whereas the nation has been attracting FDI in nearly all sectors the federal government is pushing for funding in high-tech and digital economic system sectors. As well as, the federal government has additionally launched incentives to assist companies affected by the pandemic. These embrace tax breaks, delayed tax funds, land payment leases, and assist insurance policies for employers and staff.
Whereas future variants and pandemics are tough to foretell, Vietnam has absolutely vaccinated 76.6 % of its inhabitants, whereas round 25.5 % have additionally been given a 3rd dose or booster photographs as of January 26, 2022.
Whereas Vietnam has confronted challenges, its economic system stays resilient. Whereas the present disaster is way from over, as Vietnam additional opens up and the federal government works on enterprise reforms, international traders are more likely to proceed their expansions and manufacturing shifts as they diversify provide chains and have a look at new markets. On this context, Vietnam is more likely to proceed to achieve from provide chain restructuring aided by its community of free commerce agreements and enterprise surroundings.
About Us
Vietnam Briefing is produced by Dezan Shira & Associates. The agency assists international traders all through Asia from workplaces the world over, together with in Hanoi, Ho Chi Minh Metropolis, and Da Nang. Readers could write to vietnam@dezshira.com for extra assist on doing enterprise in Vietnam.
We additionally preserve workplaces or have alliance companions helping international traders in Indonesia, India, Singapore, The Philippines, Malaysia, Thailand, Italy, Germany, and the United States, along with practices in Bangladesh and Russia.
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