Vietnam emerges as a magnet for foreign direct investment

By An Hong   August 22, 2016 | 02:50 pm GMT+7
Vietnam emerges as a magnet for foreign direct investment
Laborers work at a garment factory in Bac Giang province, near Hanoi October 21, 2015. Photo by Reuters/Kham/File Photo

As usual, foreign investors want to cash in on Vietnam’s low-cost manufacturing.

Global investors have their eyes on “emerging Asian countries”, and Vietnam is no exception, according to the latest report released by the United Nations Conference on Trade and Development.

Statistics show that last year emerging economies in the Asian region welcomed $541 billion in investment.

The report said investors have recently started to target Vietnam while many are moving away from China due to more expensive labor costs and geopolitical risks.

Foreign direct investment inflows hit $11.3 billion in the first three months of this year, the closest period for which data was available, according to the Ministry of Investment and Planning,

Foreign investors have also started to enter Vietnam via mergers and acquisitions.

Official statistics show that foreign investors have become majority shareholders in more than 1,700 local companies in the past year. These investments, from July 1, 2015 to July 20, 2016, are estimated to have reached $1.89 billion, according to the Foreign Investment Agency under the Ministry of Planning and Investment.

Given the fact that the country has concluded a variety of free trade agreements, it is increasingly easier for foreign investors to enter the Vietnamese market.

The Vietnamese government’s commitment to accelerate share sales in state-owned enterprises will provide more opportunities for foreign investors.

Vietnam last month officially scrapped a long standing 49 percent foreign-ownership cap in publicly listed companies, allowing foreign investors to own a 100 percent stake in several listed companies across various industries, including consumer, property, transport, construction, manufacturing, financial services and agriculture.

The Southeast Asian country has topped an index for foreign direct investment in emerging market countries for the second year in a row, according to a study by fDi Intelligence, a Financial Times data analysis report.

A 2015 study into inbound greenfield investment in 14 emerging markets showed that Vietnam scored 6.45, which meant the country attracted more than six times the amount of foreign direct investment that might be expected relative to the size of its economy, ranking far ahead of neighboring competitors such as Thailand (2.43) and Malaysia (2.86).

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