Premia TNC Vietnam Team
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The Foreign Direct Investment Landscape in Vietnam
Setting new records in both registered capital and actual disbursement, Vietnam has experienced a remarkable surge in foreign direct investment (FDI) in recent years. FDI inflows surged past $18 billion in July 2024, marking a strong year-on-year increase. This upward trend is evident across all key indicators. Backed by robust growth in major economic metrics, actual capital disbursement exceeded $12.5 billion. Newly pledged FDI reached close to $10.8 billion, while additional registered capital approached the $5 billion mark.
These figures underscore the sustained momentum and growing investor confidence in Vietnam’s economic landscape, with both registered and disbursed capital continuing to expand steadily over the first seven months of the year.
3 Compelling Reasons to Consider Investing in Vietnam
1. Ease of Doing Business
Vietnam’s consistent policy environment and robust economic performance have earned it the third spot in the 2024 Emerging Asia Manufacturing Index. The country’s manufacturing sector recorded an impressive 8% growth in 2022, three times higher than in 2020 and 2021. This momentum is largely fueled by government-led reforms in labor laws, regulatory frameworks, and infrastructure, which continue to bolster foreign direct investment inflows. The country is also expanding industrial zones and seeking global partnerships beyond ASEAN to sustain its growth trajectory.
2. Economic Outlook
Vietnam’s expanding digital economy, projected to reach US$52 billion by 2025, is reshaping consumption trends and attracting investor interest in high-growth sectors like e-commerce, digital banking, and online gaming. Rising disposable incomes, driven by a growing economy, a swelling middle class, and a population nearing 100 million, are fueling consumer demand across industries. This shift is evident in the pursuit of higher standards in education, healthcare, and leisure, with higher education enrollment rising from 16% in 2005 to 29% in 2015. As consumer spending surges, foreign direct investment in consumer sectors continues to climb, reinforcing Vietnam’s positive growth outlook.
3. Trade and Tax Agreements
Vietnam has emerged as a strong global trade partner since joining the WTO in 2007, leveraging over a dozen Free Trade Agreements, including RCEP, CPTPP, and EVFTA, through its ASEAN membership to enhance trade with key regions like the EU, UK, and Asia-Pacific. Additionally, Vietnam has signed Double Tax Avoidance Agreements with more than 80 countries, helping foreign investors reduce or eliminate tax liabilities and making the country an attractive destination for international business.
Foreign Investment Zones Provide Business Ecosystems
Vietnam’s foreign investment zones, such as Special Economic Zones (SEZs), Industrial Parks (IPs), Export Processing Zones (EPZs), and High-Tech Zones, have been instrumental in driving investment since the introduction of Doi Moi reforms. These zones offer investors preferential tax treatment, robust infrastructure, simplified customs procedures, and access to industrial land. They are designed to promote sector-specific development and improve operational efficiency for foreign enterprises. The government’s efforts to modernize and expand these zones reflect its long-term vision of creating well-managed, globally competitive business clusters.
4 Major Zones Attracting Foreign Capital in Vietnam
1. Tan Thuan Export Processing Zone (Ho Chi Minh City)
Recognized as one of Vietnam’s earliest and most successful Export Processing Zones (EPZs), this zone has played a pivotal role in advancing the country’s light manufacturing and electronics sectors, attracting substantial foreign investment and fostering industrial growth
2. Hoa Lac High-Tech Zone (Hanoi)
With a strong focus on advancing innovation, the organization specializes in the fields of information technology, biotechnology, and cutting-edge new materials, driving progress across multiple high-impact industries.
3. Dung Quat Economic Zone (Quang Ngai Province)
This location proudly hosts Vietnam’s pioneering oil refinery and petrochemical complex, marking a significant milestone in the nation’s industrial and energy development.
4. Dinh Vu-Cat Hai Economic Zone (Hai Phong)
A major industrial and maritime hub located in the northern region of Vietnam, serving as a key center for manufacturing, logistics, and international trade.
Singapore’s Presence is Expanding Across Key Sectors
Singapore’s investments in Vietnam have played a pivotal role in accelerating the country’s economic development, with a strategic focus on manufacturing, real estate, and energy. In manufacturing, Vietnam has emerged as a key hub for global electronics production, benefiting from the strategy as companies diversify supply chains. The real estate sector has flourished amid rapid urbanization and rising incomes, especially in major cities like Ho Chi Minh City and Hanoi, with urbanization projected to reach 50% by 2030.
Meanwhile, energy investments span coal, gas, and hydropower, with renewables like solar and wind gaining momentum, although they still represent a smaller share of Vietnam’s over 60 GW installed capacity.
Relocation Trends Reflect Vietnam’s Rising Competitiveness
Businesses are increasingly relocating to Vietnam due to its strategic advantages as a low-cost, high-growth destination. As a top “China+1” alternative, Vietnam offers foreign investors a way to diversify operations and mitigate risks associated with rising costs and trade uncertainties in China while benefiting from geographic proximity and established supply routes. The country’s open economic policies, removal of quarantine restrictions, and commitment to accessibility for business and travel further enhance its appeal. Vietnam also boasts a robust network of industrial zones, a large and affordable labor force, and a welcoming environment for foreign direct investment.
When evaluating relocation options, companies carefully consider factors such as infrastructure, talent availability, raw material access, incentives, and logistics, areas where Vietnam consistently stands out.
Investment Incentives, Workforce and Zones Create an Ideal Environment
Driven by a dynamic labor market and a wide array of government-backed incentives, Vietnam offers a highly attractive environment for foreign investment. Among the most compelling incentives are corporate income tax (CIT) benefits, which include preferential tax rates and tax holidays for projects aligned with national development goals. These incentives are especially generous for investments in high-tech, large-scale, or socially significant sectors, as well as for businesses operating in economically disadvantaged regions. Additionally, Vietnam’s competitive minimum wages further enhance its appeal as a cost-effective destination for business operations.
Along with these financial advantages is Vietnam’s robust and youthful workforce, with nearly 60 million people and a labor participation rate of 76 percent. While the country continues to develop its pool of highly skilled labor, it boasts high literacy rates and a growing number of English-proficient and technically skilled workers. To support industrial growth, the government has established Investment Zones (IZs) and Industrial Parks (IPs) across the country, offering modern infrastructure, logistical support, and additional tax incentives. Strategically located along key trade routes, these zones facilitate seamless integration into global supply chains, making Vietnam a strategic hub for manufacturing and export-oriented businesses.
Building Integrated Operations Between Singapore and Vietnam
Many foreign investors choose to establish a Vietnamese subsidiary under a Singapore-based holding company structure. This arrangement provides significant strategic benefits, including tax efficiency, legal protection, and ease of capital returns. With Singapore’s strong financial services and Vietnam’s manufacturing capabilities, companies can build vertically integrated operations that optimize resources and supply chains across both countries. This synergy is particularly useful for companies seeking regional expansion through a well-regulated financial center while capitalizing on Vietnam’s cost-effective production environment.
Premia TNC Vietnam Team
Author
Premia TNC Vietnam is a dynamic team of experts dedicated to supporting businesses and entrepreneurs as they establish, manage, and grow their presence in Vietnam and across the region. Premia TNC Vietnam specializes in providing tailored corporate services, from company incorporation and compliance to tax planning and accounting. With our extensive experience and deep understanding of the local regulatory environment, we are here to make business operations smoother and more efficient.
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