Foreign Investment in Vietnam Is Fueled By Covid-19 Success

Vietnam has been an attractive destination for foreign investment...

Foreign investment, especially in the technology industry, has become the norm in Vietnam within 30 years. The range of career opportunities has been widened since foreign capital plays the role of the driving force of Vietnam’s economic growth, making a leap in trading. Investors from different areas like Europe, America, Asia… choose Vietnam as the destination. 

According to the Ministry of Planning and Investment, Vietnam attracted $38 billion of foreign direct investment (FDI) in 2019, increasing by 7.2% compared to that of 2018. This figure also peaked in the chart of the entire decade. 

So, what are the reasons behind the success of Vietnam? Experts have implied that there are 3 main factors for this record FDI.

First of all, Vietnam is currently socio-politically stable, which makes a room for the economy to grow. Moreover, the golden population structure with 60% of its population is in the working age, along with the advantage of geographical location also fuel the increase in FDI inflows. On the other hand, the government has been putting great efforts in restructuring the economy, improving the legal frameworks for international business, making the way for foreign investment.

Vu Dai Thang, Deputy Minister of Planning and Investment, stated that the country would keep encouraging long-term foreign investment, especially the sectors in which Vietnam has strong advantages and abilities. 

The sectors, where overseas investors can bring high technology and modern business models to generate values, contain high-tech, processing and manufacturing, supporting industry, tourism, services, and high-tech agriculture. It is easily seen that IT innovations from international businesses can make a difference from other domestic ones.

... until the pandemic comes and messes things up

The Coronavirus pandemic has been the biggest challenge in the new decade, causing a huge fuss all over the world as it delays all business and trading activities. To keep COVID-19 under control, authorities have to implement many restriction policies. This really makes things difficult for businesses, as these policies will much or less disable their services. 

 Source: World Services Group

Consumers have admitted that they are trying to reduce their spendings on goods other than necessities to save their money. Many projects are delayed due to the pandemic, leaving the total income in a noticeable decrease.

Therefore, to keep themselves alive, companies have to undergo staff cutbacks. This is especially true for those depending on foreign investment and the global market. The Ministry of Planning and Investment’s Foreign Investment Agency has shown that the total FDI in the first quarter of 2020 reached $8.55 billion, accounting for only 79.1% of that in the same period of 2019. From January to April 2020, FDI attraction has reached $12.3 billion, falling by 9.6%. These figures are predictable as there is a drop in the number of newly-registered projects and the value of stake acquisitions.

A strong bounce-back of foreign investment is in sight

However, with the incredible efforts from the Ministry of Health, Vietnam has been through more than 20 days without community transmission of Covid-19 up until now. The country has received international praise for the immediate prevention guidelines to keep the number of infected cases as low as possible. While the fight is still undergoing, businesses are ready to bounce back after the pandemic. 

Recently, Apple has been recruiting various technical career positions in Ha Noi and Ho Chi Minh, which might indicate that the technology giant would place its manufacture in Vietnam. If this is true, it could be the bomb for the tech industry in South East Asia country. 

China has always been a frequent destination for technology giants to launch their manufactures and expand their businesses as the 1-billion-population country has strong potentials in various aspects. Nevertheless, the severe influence of Covid-19 on China has driven everything differently. 

Investors are moving their interest in other countries that might be less harmed during the pandemic. Therefore, Vietnam, usually described as the best ASEAN country to invest in, is one of them.

“This slump is only temporary. Observing how Vietnam has managed to control the situation, investors will increase their funds,” said Nguyen Mai, chairman of Vietnam’s Association of Foreign Invested Enterprises. Many experts believe that Vietnam’s successful story in handling the virus might boost the foreign investment in the post-pandemic future.

Tech giants continue to believe in Vietnam's prospects

Source: TechRadar

Apple is not the only one to make the investment. Major foreign businesses are reported to set up new factories in Vietnam, as the replacements for those in China. Well-known for being the attractive destination for software development outsourcing, Vietnam is surely in the sight of the technology giants. Google and Nintendo are two of the names up on the list. 

This is a huge opportunity for both Vietnam and foreign investors to add values after the pandemic. The recovery will take place fiercely in the near future. As a result, foreign investment and transactions are strongly encouraged to make a headway in the economy, based on the technology and manufacturing innovations.

As a proud Vietnamese software development company, IDS Software has been continuously making great improvements everyday to bring out the best solutions and services to our clients. Having experience in working with global customers, we deeply understand how to make the most benefits out of the foreign investment. Delivering many projects in different industries, we are confident to contribute to the total growth of the technology industry in particular and the Vietnam economy in general.

If you have any inquiry, feel free to contact us.