Vietnam – An attractive investment destination in 2019
Vietnam – An attractive investment destination in 2019
  • Choe Nam-suk
  • 승인 2019.01.25 05:12
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Ho Chi Minh city
Ho Chi Minh city

In the context of the global economy in 2018 facing many risks and challenges due to the emergence of trade protectionism, the U.S - China trade war, the FED steadily shrinking Quantitative Easing (QE) packages and increasing the basic interest rate, Brexit, etc. Vietnam has emerged as a bright spot with a GDP growth rate among the highest in the world, becoming the center in the global supply chain for production, trade and investment.

Year 2018: GDP grew 7.08%, FDI increased 9.1%

For the first time since 2008, Vietnam's GDP growth reached 7.08%, belonging to the group of countries with the highest GDP growth, both in the region and all over the world. The GDP volume has risen sharply, reaching over 5.5 million billion VND (US $238 billion), with a GDP per capita of US $2,587. 
Remarkably, the high growth is achieved while the macroeconomic foundation is well maintained and increasingly strengthened, the inflation is controlled, the Consumer Price Index (CPI) remains at only 3.54%, and the other main economic index is guaranteed, which shows that the macro policies are operated very flexibly and effectively.

This achievement is even more important with regards to the complicated and unforeseeable changes in both the regional and international context, especially trade wars, fluctuations in exchange rate and interest rate, etc. Many international organizations have assessed that Vietnam had taken and is taking the right steps to excel at the regional and global level, and become the center in the global supply chain for trade and production, the most desirable investment destination in the Asia-Pacific region.

Currently, Vietnam has a trade relationship with over 200 countries and territories, with gross trade turnover of over US $482 billion. Vietnam has approved 11 bilateral and multilateral Free Trade Agreement (FTA), completed negotiations for the Vietnam – EU Free Trade Agreement, while continuing negotiations for the Regional Comprehensive Economic Partnership (RCEP) and bilateral FTAs with Israel and Cuba. Around 60 economies have been negotiating FTAs with Vietnam, including key trade partners holding about 90% of Vietnam's trade turnover. There are now fields in which Vietnam has become one of the world's factories, such as mobile phones, electronics, automotive assembly, textiles, leather, rice, shrimp, shark catfish, etc.

The private sector has played an increasingly important role in the Vietnamese economy with an 18.5% increase in investment capital volume, accounting for 43.3% of the total investment capital in 2018. Notably, foreign direct investment (FDI) registered capital in Vietnam increased a further 9.1% compared to the year 2017, hitting a record of US $35.5 billion, of which South Korea investors ranks second with US $7.2 billion. This is a very impressive figure, considering that the international capital current tended to withdraw from emerging markets in the past year in response to the rising FED’s interest rate and the increasing risk of trade war between U.S and China. 

The business environment is continually improved 

From 2015 to now, Vietnam's business and investment environment is continuously improved. According to the Doing Business Report published by the World Bank, Vietnam has made considerable improvement, ranking 68th out of 190 economies in 2017, up 14 places compared to the year 2016 (rank 82th). In 2018, although the ranking reduced one place, but six out of ten indicators of Vietnam had improved. Together with Indonesia, Vietnam is the country which has implemented the most improvements in the last 16 years (each country has 42 improvements). During the five years since the Government of Vietnam issued the resolution of 19 of "the main solutions for improving business environment and national competitiveness" (2014), Vietnam has 18 recognized improvements, notably the indicators of tax and social insurance, access to electricity, access to credit information has been continuously recorded by the WB over the past years.

Ha Noi city
Ha Noi city

For the global competitiveness ranking, from 2014 to 2017, although Vietnam's ranking is unstable, the national competitiveness of Vietnam had been continuously improved. In 2017, there were 5 out of the 12 indicators that increased in score. In the context of robust technological changes, political polarity and the fragile economic recovery, in 2018 the World Economic Forum (WEF) officially applied new methods and published global competitiveness reports 4.0. According to this report, although the 4.0 competitiveness index of Vietnam is 4 places lower (from 74 down to 77), the score increased 0.2 points with 4 out of the 12 main indicators increased. These achievements shows that Vietnam’s innovative motivation to catch up to the 4.0 trend is still weak and needs to be further improved, especially indicators of administrative procedures, business culture, exchange and diversification level, commercialization level.

In 2018, according to the World Intellectual Property Organization (WIPO), the Vietnam's innovation index ranked No 45 out of 126 economies, up 2 places compared to 2017. In the last 5 years, the ranking of Vietnam’s innovative pillars tended to improve continuously. In the group of lower middle-income countries (30 countries), Vietnam ranked the second. In addition, when considering the correlation between income level (GDP per capita) and innovation capacity, WIPO recognizes Vietnam as continually having a much better innovation achievement compared to the rate of development.

Vietnamese government determined to improve its business environment in order to adapt to the Industrial Revolution 4.0 

In 2019, the Vietnamese government continues to set a target of macroeconomic stability, inflation control, and improvement of the economy’s productivity, quality, effectiveness, autonomy and competitiveness. 

Da Lat city
Da Lat city

On the first day of 2019, the Government of Vietnam also announced a plan to further improve the business environment and national competitiveness in 2019 while adjusting for 2021, in which Vietnam is determined to raise the international rankings in WB, WEF, WIPO and UN’s report on the national business environment and competitive capability. In particular: business environment ranking - WB’s Doing Business up 15-20 places, in 2019 alone up 5-7 places; competitive capacity ranking – WEF’s GCI 4.0 up 5-10 places, in 2019 alone up 3-5 places; innovation ranking – WIPO’s GII up 5-7 places, in 2019 alone up 2-3 places; WB’s logistics effectiveness ranking up 5-10 places; WEF’s tourism competitiveness ranking up 10-15 places, in 2019 alone up 7-10 places; UN’s e- government ranking up 10-15 places in 2020.

With five groups of solutions to simplify regulations on business conditions, specialize inspection for goods and services products, promote electronic payments, develop innovative ecosystem and support for start-up enterprise, economists claim that Vietnamese government is showing a determination to comprehensively improve on business environment and national competitiveness capacity in order to adapt to the new manufacturing framework in the Industrial Revolution 4.0, and continue to be the most attractive investment destination to foreign investors in 2019 as well as in the following years.

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