VIETNAM: FOREIGN INVESTMENT

FDI in Figures

FDI inflows to Vietnam have increased considerably since the country authorised foreign investments back in 1988. The socio-political stability of the country is one of its main assets. Although FDI was affected by the global economic crisis, declining in 2009, the policy of economic openness has enhanced the country's attractiveness to investors since 2010. According to the World Bank, the Vietnamese business climate improved in 2016, with the country gaining nine places in the 2017 Doing Business Report (82nd out of 190 compared to 91st in 2015). The greatest progress has been made in protecting minority shareholders and cross-border trade.

Traditionally directed towards light industry, FDI inflows are now quickly turning towards heavy industry, real estate and tourism. Inflows are expected to continue, confirming the country's position as the fourth most attractive country in terms of FDI in Asia, just behind China, India and Indonesia. Thanks to FDI, Vietnam now produces high value-added products such as smart phones and tablets.

In 2016 as in 2015, the amount as well as quality of FDI in Vietnam increased. The country has attracted large technology, industrial and HR projects. In 2016, the country recorded a 9% increase in FDI to a total of USD 24.4 billion (including announcements of new investments and working capital). In 2016, the main investor countries were South Korea, Japan and Singapore. The manufacturing sector attracted the most FDI. (64% of total investment)

The country is willing to create a more favourable environment for foreign investors. For more information, you can consult the Investment and Trade Promotion Centre of Ho Chi Minh City (ITPC).

Country Comparison For the Protection of Investors

	Vietnam	East Asia & Pacific	United States	Germany
Index of Transaction Transparency*	7.0	5.0	7.0	5.0
Index of Manager’s Responsibility**	4.0	5.0	9.0	5.0
Index of Shareholders’ Power***	7.0	6.0	4.0	8.0
Index of Investor Protection****	5.3	5.2	6.5	6.0

Source: Doing Business - Latest available data.

Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action. **** The Greater the Index, the Higher the Level of Investor Protection.

Foreign Direct Investment	2014	2015	2016
FDI Inward Flow (million USD)	9,200	11,800	12,600
FDI Stock (million USD)	90,991	102,791	115,391
Number of Greenfield Investments***	261	232	278
FDI Inwards (in % of GFCF****)	21.0	25.5	27.5
FDI Stock (in % of GDP)	49.0	53.7	57.3

Source: UNCTAD - Latest available data

Note: * The UNCTAD Inward FDI Performance Index is Based on a Ratio of the Country's Share in Global FDI Inflows and its Share in Global GDP. ** The UNCTAD Inward FDI Potential Index is Based on 12 Economic and Structural Variables Such as GDP, Foreign Trade, FDI, Infrastructures, Energy Use, R&D, Education, Country Risk. *** Green Field Investments Are a Form of Foreign Direct Investment Where a Parent Company Starts a New Venture in a Foreign Country By Constructing New Operational Facilities From the Ground Up. **** Gross Fixed Capital Formation (GFCF) Measures the Value of Additions to Fixed Assets Purchased By Business, Government and Households Less Disposals of Fixed Assets Sold Off or Scrapped.

Why You Should Choose to Invest in Vietnam

Strong Points

The country's strong points are:

- Positive economic prospects in terms of growth, despite the global crisis;

- A young, cheap, rapidly growing and more and more technologically qualified manpower;

- A certain social-political stability;

- A government committed to liberalising the economy and to introducing reforms based on the free market.

Weak Points

The country's weak points are:

- Weak financial structure. Although it is undergoing reforms, the financial sector is neither well regulated nor independent of the government;

- The lack of guarantees for property rights;

- A high level of corruption.

Foreign investment is subject to an array of unclear regulations, which cannot be legally guaranteed. The judiciary is subject to political influence, and commercial cases often take years to be resolved.

Government Measures to Motivate or Restrict FDI

The promotion of foreign investments is part of the country's development strategy. Therefore, the government has never stopped perfecting its judicial system, creating more incentives and taxation policies for foreign investors and trying to respect its commitments with regard to the international community. "Business forums" are frequently organised between the Vietnamese government and the private sector, these being opportunities for foreign investors to establish fruitful dialogue and to assert their interests. Additionally, Vietnamese efforts to maintain socio-political stability and set up and professionalise investment promotion activities also play a crucial role in increasing the FDI flow.

Procedures Relative to Foreign Investment

Freedom of Establishment

- The Government has relentlessly perfected its legal system, created more incentive policies for foreign investors and tried to fulfil its commitments to the international community. As well, Vietnam's efforts to maintain its socio-political stability and step up and professionalise investment promotion activities play a crucial role in increasing the FDI flow.

Acquisition of Holdings - Yes

Obligation to Declare - It's obligatory to declare any FDI.

Competent Organisation For the Declaration

- Ministry of Foreign Affairs

- Ministry of Planning and Investment

Requests For Specific Authorisations

- Preferential investment field

- Investment - banned field

Find out more about Investment Consultancy in Vietnam on Fdi-vietnam.com, the Consultancy for international investors.