We live in an era of globalization. Trading and business activities are no longer done within one’s own country but rather they are expanding beyond our national borders. As a result, the concept of foreign direct investment, i.e. FDI has become so popular. In recent times, Vietnam has been working hard to make it more appealing to foreign investors. In fact, for a very long time, FDIs have been a crucial part of their external economic agenda.
As it stands the government of Vietnam has gone on to make several improvements to the economic conditions of Vietnam. This includes highlighting their comparative advantages as well as introducing a climate that is more FDI-friendly. All these have shown positive results and thus the foreign investments in Vietnam have seen a steady rise. Right now, if somebody were to look for a country that has the potential to be an upcoming big market in Asia, then they should seriously consider Vietnam.
Current Situation: As it stands, there are about 16300 active FDI projects in Vietnam. That number is staggering and shows how many foreign direct investment opportunities are there in Vietnam. It also highlights how people from all over the world, over 100 countries and territories to be specific, are taking Vietnam seriously and are exploiting this great business opportunity. The 16300 active projects in Vietnam have brought in an estimated $238 billion which only does immense good for the country’s economy. In 2013 alone the FDI numbers were in excess of $22 billion. This figure is a massive 35% increase from the previous year.
Causes for such scenario?
There are several factors that have seen the rise of Vietnam as the perfect foreign direct investment destination. One of them being, the ability of the country of ensuring socio-political stability. Some would consider Vietnam of having one of the most dynamic economies in the world right now. There has been a persistent rise in economic growth starting from 1991 till 2010. This economic growth has allowed Vietnam to find the stability that most other countries in the region lacked. In fact, from the year 1991 till 2010 the economic growth had an average of 7.5%. The country did experience some turbulent times between 2011 and 2013 but even then the GDP growth rose by an impressive 5.6%. Economists from all over the world predict that Vietnam will experience such a growth beyond the years of 2016 and 2017 meaning now is the right time to invest in this great country.
The second reason which makes Vietnam such an ideal place for foreign direct investment is their population structure. As it stands 60% of the entire population of Vietnam is of working age. This means that labor force in Vietnam is of abundance. One could even go on to say that Vietnam is experiencing a golden population structure. Most of the workforce is highly skilled and quite qualified too. As a result, businesses such as manufacturing, garments and textile, agriculture, and others that need a significant amount of manpower can be easily done in Vietnam. At the same time, the cost of labor is competitive too so there won’t be any kind of increase in the cost of production.
Along with the working population, the geographic location of Vietnam helps them significantly. The country is located in the center of East Asia. This particular region is the home of a number of flourishing economies and dynamic markets. The fact that Vietnam has multiple trading agreements with different countries means that one can easily utilize the geographic location of the country and export their products and services to the nearby countries. Vietnam has a market economy in place and happens to be a member of the WTO. Foreign investors will be eager to start their business in this country to fully utilize their resources and trade almost worldwide.
Government support: A key factor when it comes to investing abroad is how supportive will the government be. Many countries don’t like the idea of the foreign entity or foreign capital being invested in their country because they believe that these entities will transmit the profits back to their own countries. The Vietnamese government, however, is extremely focused on making the whole process of FDIs much smoother and easier. As mentioned earlier, the government has gone on to create a business environment where foreign investors are felt welcomed. The rules and regulations have been simplified so that new businesses can get started right away. The Vietnamese government’s main goal was to improve the economy of the country and they feel that FDIs are the perfect way to go with.
The government is also working on other projects such as improving the infrastructure of the country as well as introducing newer roads and transportation facilities. They believe these sorts of improvements will go a long way in terms of attracting foreign direct investments.