Five Trends Driving Increased FDI in Vietnam

Vietnam has emerged as one of Asia-Pacific’s hotspots for corporate investors. Ranked by the Financial Times as the top global location for greenfield investment, Vietnam attracted $7.4 billion in foreign direct investment (FDI) in H1 2015, up 9% y-o-y.

Investors see Vietnam as a hotspot for the following reasons:

  • Proximity to China: Vietnam shares a border with China and improving transport links (see below) make it a strategic production base from which to market to Chinese customers.

  • Low-cost labour: Current minimum wage levels range from $101.4-$146.2 per month - depending on location - and are cheaper than current levels in China, which range between $147-$305 per month.

Vietnam: Infrastructure Investment Spending, 2008-2025(f)

Source: PWC: Asia-Pacific Infrastructure Prospects to 2025

Vietnam: Disposable Income & Consumer Expenditure ($Billions), 2008-2017(f)

Source: Deloitte: Retail in Vietnam

In sum, Vietnam is a high-potential market, and this is supporting increased investment.

That said, the market still presents significant risks, it has a low ranking (78 in 2014, compared with 99 in 2013) on the World Bank’s Ease of Doing Business Index, indicating challenges with legal protection and government transparency.

However, these rankings show signs of improvement and investment numbers indicate that business leaders are both confident of managing risks and convinced of Vietnam’s potential due to the five factors discussed.

#Vietnam #China #AsiaPacific #Investment #Manufacturing #Infrastructure #Trade #TPP #Retail