Vietnam’s attractiveness to foreign investors experienced continual enhancement last year, coupled with an elevation in the quality of the foreign direct investment (FDI) it garnered, as per a report by VinaCapital released on January 9.
The report highlighted key factors contributing to Vietnam’s appeal to international investors.
Firstly, wages in Vietnam are lower than those in China, yet the quality of the workforce remains comparable, as indicated by surveys conducted by the Japan External Trade Organization.
Another significant advantage is Vietnam’s geographic proximity to the high-tech industry supply chains in Asia, along with its position among the group of friendshoring nations, which face low risks of tariffs on exports to the US.
In the past year, Vietnam’s FDI landscape continued to progress. The United States and Vietnam elevated their diplomatic relationship to a Comprehensive Strategic Partnership, solidifying Vietnam’s standing within the US’ friendshoring network.
Additionally, Xi Jinping visited the country three months after Joe Biden, making Vietnam the sole Asian nation visited by both leaders last year.
Geopolitics has gained increasing prominence in companies’ decisions on where to invest, as emphasized by the International Monetary Fund, Atlantic Council, and others.
Apple’s decision to relocate some of its research and development activities to Vietnam, following the 2022 move to manufacture the Apple Watch in the country, underscores a significant advancement in the complexity of activities conducted by the company in Vietnam.
According to Harvard research, the most influential driver for growth in a country like Vietnam is an elevation in the complexity of the products and services it can produce.
The global minimum tax is not perceived as a threat to Vietnam’s FDI inflows. The primary reason is that tax incentives are not the primary motivator for multinational companies when choosing to invest in one developing country over another, as highlighted by research from the World Bank. These corporations consider a broad range of factors, including wages, workforce quality, infrastructure quality, and ease of doing business, in their investment decisions.
