Cumulative FDI commitments for the first 10 months of 2023 reached US$25.7 billion, 14.7% higher than the same period in 2022, despite global uncertainties, thanks to continued confidence in Vietnam’s stability and openness, the World Bank assessed in its country’s macro report.

Production activities at Rhythm Precision Vietnam in Noi Bai Industrial Park, Hanoi. Photo: Pham Hung/The Hanoi Times

Cumulative FDI disbursement was $18 billion as of present, 3.2% higher than a year ago. “Manufacturing continues to be the main area attracting FDIs into Vietnam,” noted the report.

High-frequency data showed continued, albeit modest,  improvement in economic activities on the supply side. The monthly Industrial Production Index (IIP) has been positive since April 2023, pointed the World Bank.

In October 2023, the IIP registered a growth rate of 2.89% month on month (m/m) and 5.83 year on year (y/y), compared to 0.03% and 5.51%, respectively in September.

In October, Vietnam's Manufacturing Purchasing Managers' Index (PMI), a key gauge of the manufacturing sector's health, stayed in contraction territory at 49.6, slightly down from September's 49.7. According to the S&P Global PMI, there was only a marginal improvement in new orders during October 2023, and it was not substantial enough to motivate businesses to increase their production.

Another positive indicator mentioned by the World Bank was the continued improvements of exports and imports of goods in October in response to recovering external demand, increasing by 1.6% m/m, and 6.01% y/y; 1.05% and 6.28%, respectively.

While a gradual recovery of exports is ongoing, domestic consumption remains subdued, and slow credit growth continues to reflect weak private domestic investment and investor confidence. The World Bank pointed out that the Government continues providing support to the economy through a 35% (y/y) increase in public investment during the first 10 months.

“However, implementation challenges continue to affect the rollout of the capital budget. Given the slow pace of economic recovery, the authorities may consider extending the economic support program to 2024 to allow for the full implementation of investment projects," the bank said.

Preparing higher quality projects – including through better feasibility studies and the reform of public investment procedures would help to speed up implementation, it added.

In addition, a strategic and well-prepared investment pipeline with a focus on green, resilient, and regional infrastructure will help bolster sustainable economic development, the report concluded.

Hanoi among top localities in FDI attraction

Hanoi ranked third among localities in FDI attraction during the first 10 months of 2023 with over $2.6 billion. Anticipated for the remaining two months of 2023, the city is projected to attract approximately $484.8 million in FDI.

Notable contributors to Hanoi's foreign investment influx are countries such as Japan, South Korea, Singapore, Europe, and the US. These investments are primarily concentrated in sectors like real estate, manufacturing and processing, construction, entertainment, accommodation and food services, health, and education.

Hanoi's prowess in attracting foreign investment stems from both objective and subjective factors. As the capital, it possesses competitive advantages in socio-economic development, sustainable growth, abundant high-quality human resources, and diverse markets. Additionally, Hanoi is recognized for its high-quality infrastructure, efficient administrative processes, and ongoing commitment to assist businesses.

The city continually enhances its business investment environment by focusing on digital platforms, institutional reform, administrative procedure streamlining, and cost reduction. Policies supporting businesses and creative startups are consistently promulgated and implemented.

During a meeting on November 14, Vice Chairman of Hanoi People's Committee Nguyen Manh Quyen urged relevant departments, branches, and local authorities to intensify administrative reform, provide timely information on investment planning and infrastructure projects, and promptly address issues hindering investment.

Industrial parks are advised to enhance their infrastructure to be more appealing to investors. Simultaneously, investment promotion events should be cost-effective.

Looking ahead to 2024, Hanoi aims to attract FDI totaling around $3.15 billion, with over $2.15 billion for land-utilizing projects and approximately $1 billion for commercial and service projects. The city's FDI target for 2025 is about $2.7 billion, with land-utilizing projects accounting for over $1.5 billion and commercial and service projects around $1.2 billion.