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Việt Nam – a destination of pioneering industries

Việt Nam has a prime opportunity to lead in attracting technological “eagles”.

Earlier this month, Foxconn Group received the green light from the Quảng Ninh provincial government to launch two projects worth US$551 million in the province. These projects, aimed at producing smart entertainment products and smart systems, fall within Quảng Ninh’s target industries for investment in processing and manufacturing.

With these initiatives, Foxconn’s total investment in Quảng Ninh rises to nearly $1 billion and surpasses $3 billion in Việt Nam overall. The company is involved in large-scale electronics and components projects in Bắc Giang and Bắc Ninh provinces, including the manufacturing of equipment and components for Apple. Last month, Foxconn also invested $383 million in a project at the Nam Sơn Hạp Lĩnh Industrial Park in Bắc Ninh.

Meanwhile, the Amkor Group recently obtained an amended investment certificate to boost its investment by an additional $1.07 billion for its semiconductor project in Bắc Ninh. This decision has propelled the total investment in the Amkor project to $1.6 billion, a staggering 11 years ahead of schedule. Initially, Amkor had projected to invest only $1.6 billion in Việt Nam by 2035.

In addition to these two investors, recent reports indicate that numerous prominent technology corporations like Samsung, LG, and industry giants such as Hyosung, CJ, and Posco are gearing up to inject billions more into Việt Nam in the near future.

During a recent meeting with Prime Minister Phạm Minh Chính during his official visit to South Korea, Jeong Cheol-dong, CEO of LG Display, said LG had already poured over $5 billion into investments in Việt Nam and planned to invest an extra $3 billion over the next five years. As part of this expansion, the LG Innotel factory aimed to double its capacity, solidifying LG’s integrated production hub in Việt Nam. Jeong added that LG viewed Việt Nam as its critical manufacturing hub.

Meanwhile, Samsung has long regarded Việt Nam as a global manufacturing hub, having invested over $22.4 billion and consistently increasing its capital in recent years by an average of around $1 billion annually. With the opening of its Research and Development (R&D) Centre in late 2022, Samsung has designated Việt Nam as the group’s global R&D hub – a designation that Việt Nam had never anticipated.

This, however, is just the beginning, as Việt Nam is increasingly becoming a focal point for global corporations in the semiconductor and AI sectors. Companies like Intel, Amkor, HanaMicron, Marvell, and Synopsys have already invested in Việt Nam and continue to do so.

Meanwhile, NVIDIA Corporation is progressively actualising its vision of making Việt Nam its “second home”.

Minister of Planning and Investment (MPI) Nguyễn Chí Dũng recently engaged in an online discussion with NVIDIA to explore further collaboration plans.
The interest of tech giants in Việt Nam is palpable. In a recent statement, the MPI highlighted that not only would numerous large-scale projects spanning semiconductors, energy (including battery production, photovoltaic cells, and silicon bars), component manufacturing, electronics, and high-value-added products see fresh investments and expanded capital in the first half of this year, but Việt Nam also held promise in attracting investments across cutting-edge industries like AI, semiconductors, hydrogen, and renewable energy.

The MPI is currently finalising a Draft Decree concerning the establishment, management, and utilisation of the Investment Support Fund. This initiative aims to provide support from the Government to high-tech enterprises, companies engaged in producing high-tech goods, and those undertaking high-tech application projects.

According to Statista Market Insights, Việt Nam is poised to experience a Compound Annual Growth Rate of 11.6 per cent in semiconductor revenue from 2023 to 2027, reaching $31.28 billion by 2027. Within this projection, integrated circuits, the cornerstone of the semiconductor industry, are anticipated to hit $16.44 billion this year.

Google’s forecast suggests that Việt Nam’s digital economy is set to surge eleven-fold by 2030, reaching $220 billion, nearly half of the country’s current GDP. AI will play a pivotal role in Việt Nam’s realisation of these forecasts, according to Marc Woo, managing director of Google Asia Pacific for Việt Nam.

The forecast appears clearly optimistic. However, given the intensifying competition for investment attraction, Việt Nam must act swiftly in the present landscape; otherwise, it would miss out on this unparalleled opportunity.

In a recent report to the Government, Minister Dũng of the MPI highlighted the persisting challenges facing the economy, noting that emerging sectors like the digital economy, green economy, AI, chips, and semiconductors are lagging, risking Việt Nam’s competitiveness on a global and regional scale.

The MPI reported that despite a steady rise in foreign investment in Việt Nam, the number of large-scale projects with advanced technology remained limited. Việt Nam has attracted only 108 projects exceeding $500 million in investment, averaging 15 projects annually, with a mere 27 falling within the high-tech sector.

“Immediate steps are required to cultivate skilled human resources, particularly in semiconductor electronics to sustain and enhance investment appeal. Simultaneously, addressing local electricity shortages in regions housing numerous electronics industry ventures is imperative. Additionally, streamlining processes to simplify and expedite post-investment registration procedures, such as obtaining construction permits and fire safety certifications, is crucial,” Dũng said.

However, this is just one of the challenges. The pressure to compete for foreign investment in the high-tech sector is intensifying, with many countries, including the US, Europe, South Korea, Japan, Malaysia, Indonesia, and Thailand, requiring substantial investment support policies.

South Korea, for instance, has unveiled a 26 trillion won (approximately $19 billion) support initiative to bolster the chip industry. Malaysia issued the New Industrial Master Plan 2030 by the end of 2023, with an estimated scale of around $20 billion, aimed at revitalising Malaysia’s industries, particularly in electronics, chemicals, electric vehicles, aerospace, pharmaceuticals, medical equipment, and advanced materials. China has established a $27 billion semiconductor investment fund to enhance the self-sufficiency of its semiconductor industry. The US and Europe are prepared to allocate tens of billions of dollars to support investors in the semiconductor sector.

The increasing pressure asks Việt Nam to ready its human resources, infrastructure, and other key elements while implementing globally competitive investment support policies to both retain current investors and entice more industry leaders.

During recent discussions, multinational corporations have shown interest in contributing to Việt Nam’s Investment Support Fund. The MPI is completing the Draft Decree on the establishment, governance, and utilisation of this fund. This initiative is designed to extend governmental support, including financial assistance, to high-tech enterprises; firms engaged in high-tech product manufacturing; those undertaking high-tech application projects; and companies investing in R&D centres, provided they meet specific criteria.

If this proposal is approved, it could serve as a catalyst for Việt Nam to attract additional tech powerhouses and solidify its status as a hub for cutting-edge industries.

Efforts made to help firms join global semiconductor supply chainThe MPI has taken various solutions to support domestic firms to join the global semiconductor supply chain more intensively.Bùi Anh Tuấn, chief of the Office of the MPI, said in a recent meeting that the ministry had also given consultancy to competent agencies to perfect relevant policies and laws to facilitate investment, while enhancing international cooperation in this field. It has coordinated with other ministries and agencies in drafting a project on human resources development in service of the semiconductor industry by 2030 with a vision towards 2050, which was submitted to Prime Minister Phạm Minh Chính for approval, and proposing the establishment of a national steering committee for the development of the sector.Minister Dũng pointed out difficulties facing other sectors in Việt Nam, such as retail, housing, and real estate, along with major tasks set for the remaining months of this year. He stressed the need to effectively put in place newly issued policies and regulations, and roll out breakthrough solutions to spur growth, asking agencies to join hands in building socioeconomic plans, orientations, tasks and solutions for 2025.The minister also urged preparations for the all-level Party congresses, towards the 14th National Party Congress, as well as reforms, breakthroughs and innovation in development during the 2026-30 period. VNS

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EVFTA strengthens Việt Nam’s attractiveness to European investors

The EU-Việt Nam Free Trade Agreement (EVFTA) has undoubtedly strengthened Việt Nam’s attractiveness for European investors.

The EU, already a major investor in the country, has poured 28 billion euros into 2,450 projects, underscoring its continued confidence in Việt Nam’s potential. Notably, EU investors have added 800 million euros in foreign direct investment between January and September 2023, bucking the global trend of declining FDI.

As the EVFTA approaches the fourth anniversary of its entry into force on August 1st 2024, a survey by the European Chamber of Commerce in Việt Nam (EuroCham) paints a nuanced picture of the agreement’s impact. The EuroCham Business Confidence Index (BCI) survey, conducted by Decision Lab, reveals that EVFTA has undoubtedly opened doors for European businesses, but challenges remain.

While nearly two-thirds of respondents report some level of benefit, the extent of impact varies widely. Notably, 27 per cent of companies – a marked increase from 18 per cent in 2023 – now enjoy moderate to significant advantages, while another quarter, down from 31 per cent in 2023, has yet to see any tangible gains.

Despite these disparities, EuroCham members consistently cite tariff reductions, increased market competitiveness and expanded market access as key benefits. Other advantages include streamlined supply chains, improved business transparency and a stronger legal framework.

The EVFTA has significantly boosted Việt Nam’s exports to Europe, surging from 35 billion euros (US$37.8 billion) in 2019 to over 48 billion euros ($51.9 billion) in 2023. This growth is particularly pronounced in sectors such as electronics, textiles, footwear, agriculture and seafood. However, the increase in EU exports to Việt Nam has been far more modest, rising from 11 billion euros to only 11.4 billion euros over the same period, adding to a substantial trade imbalance.

The BCI survey reveals a number of obstacles that European businesses face in fully leveraging the EVFTA. These include complex regulatory requirements and a lack of recognition for international standards by local authorities. Additionally, a lack of understanding of the agreement among stakeholders, combined with customs valuation issues and opaque clearance procedures, complicate trade. Technical barriers, particularly in the areas of certification and product testing, also remain a significant hurdle.

“The EVFTA has certainly created new opportunities for European businesses in Việt Nam,” said Dominik Meichle, Chairman of EuroCham Vietnam. “However, our survey shows that while progress has been made, challenges remain. As we enter the fifth year of the agreement, it is crucial to continue working on simplifying procedures, aligning standards, and ensuring everyone understands how the EVFTA works.”

EuroCham Vice-Chairman Jean-Jacques Bouflet also noted that recent policy adjustments in Việt Nam have created challenges for European businesses operating under the EVFTA. “These changes, which include new internal and consumption taxes, and technical barriers to entry, are holding back the full potential of the agreement,” he remarked. “However, we are actively engaged in constructive discussions to address these issues and find solutions that benefit both Việt Nam and Europe.”

Thue Quist Thomasen, CEO of Decision Lab, emphasised the need for ongoing support and adaptation, stating: “The findings highlight that while the EVFTA is a powerful tool for economic growth, its success hinges on continued efforts to address regulatory complexities, technical barriers, and awareness gaps. A targeted approach to support businesses, particularly SMEs, in navigating these challenges is crucial.”

Unlocking the EVFTA’s full potential

Bouflet outlined EuroCham’s strategic initiatives to address the identified challenges and maximise the benefits of the EVFTA.

He said: “EuroCham is committed to working with stakeholders to streamline regulatory compliance, advocate for greater recognition of international standards, and develop comprehensive education and awareness programmes on the EVFTA. We will also continue to push for solutions to technical barriers to trade, particularly in certification and testing, and advocate for further tariff reductions and streamlined customs procedures.”

EuroCham Vietnam is actively championing the full ratification of the EU-Việt Nam Investment Protection Agreement (EVIPA) as a critical step in unlocking the full potential of the EVFTA for attracting foreign direct investment. While EU institutions have already given their approval, the EVIPA still requires individual ratification from all 27 EU member states. With 18 member states having already ratified the agreement, EuroCham Vietnam is working tirelessly with European stakeholders to encourage the remaining states to follow suit.

“EuroCham is dedicated to helping our members fully leverage the opportunities presented by the EVFTA,” Meichle said. “We will continue to collaborate closely with Vietnamese authorities to address remaining challenges and ensure that both European and Vietnamese businesses can reap the full benefits of this landmark agreement.” — VNS

European firms remain confident in their long-term growth in Việt Nam

Việt Nam’s economic potential is undeniable and the European business community remains confident in its long-term growth, said Dominik Meichle, Chairman of European Chamber of Commerce in Việt Nam (EuroCham).

The Eurocham on Monday unveiled its Q2 2024 Business Confidence Index (BCI) report, offering a nuanced perspective on the economic landscape for European enterprises in Việt Nam. Despite the country’s robust first-half GDP growth, the BCI experienced a marginal decline from 52.8 in Q1 to 51.3 in Q2 2024, underscoring the necessity for ongoing policy adjustments to maintain momentum.

The BCI survey, conducted by Decision Lab and distributed to EuroCham’s network of 1,400 members, serves as a barometer of sentiment among European businesses operating in Việt Nam. This quarterly assessment provides real-time insights into the evolving business environment of one of Southeast Asia’s most dynamic markets.

“While our survey points to areas for improvement, we believe that by working together to address administrative and regulatory hurdles, we can create a more efficient and attractive business environment that benefits both the European and Vietnamese business communities,” he said.

Meichle added: “This survey, powered by our members’ real-world experiences, is the backbone of our advocacy work. It shapes our conversations with Vietnamese officials and EU policymakers. By bringing our members’ perspectives to the table, we are identifying key areas for growth and strengthening the Europe-Việt Nam partnership through open dialogue and teamwork.

“These survey results reveal a nuanced picture of the business landscape,” said Thue Quist Thomasen, CEO of Decision Lab.

“While 68 per cent of respondents report neutral to positive current conditions, there is a slight increase in short-term caution, which needs to be addressed to continue the positive trend from the previous quarters. However, the strong 6.42 per cent GDP growth in the first half of 2024 and nearly 70 per cent expressing long-term optimism indicate robust underlying confidence that may materialise in future readings,” he said.

Actions needed to continue improving Việt Nam’s business climate
The survey paints a mixed picture, reflecting both resilience and ongoing challenges.

While fewer companies report the economic situation as “very poor” (decreasing from 8 to 6 per cent), those describing it as “not good” increased slightly (from 24 to 26 per cent). Despite this, a majority (68 per cent) still maintain a neutral to positive outlook regarding their own business conditions, suggesting an overall sense of stability.

Though overall sentiment towards Việt Nam’s economic outlook in Q3 2024 is cautiously optimistic (45 per cent), individual businesses are more hesitant about their own prospects for the quarter, with 45 per cent remaining neutral and 23 per cent expressing concerns.

This short-term uncertainty is balanced by robust long-term confidence, with nearly 70 per cent of businesses expressing optimism about Việt Nam’s economic growth over the next five years. This confidence is further reflected in the fact that a comparable percentage would recommend Việt Nam as an investment destination.

While European businesses maintain optimism about Việt Nam’s potential, the survey highlights persistent regulatory challenges that hinder growth and investment including ambiguous regulations subject to varying interpretations; burdensome administrative processes; difficulties in obtaining licences, permits, and approvals; challenges with visas and work permits for foreign workers; and duplicate or inconsistent approvals across government levels.

The survey reveals a growing commitment to sustainability among European businesses in Việt Nam, with 7 per cent having already achieved carbon neutrality. An impressive 37 per cent have set targets to reach this goal by or before 2050, while an even more ambitious 18 per cent aim to achieve carbon neutrality by 2030.

On a positive note, the recent signing of the Direct Power Purchase Agreement (DPPA) decree offers a ray of hope. Swift and successful implementation could address some of these challenges, particularly by improving access to clean energy sources and potentially providing better sustainability incentives. —VNS

ADB keeps Việt Nam’s growth outlook unchanged

The Asian Development Bank (ADB) has kept the growth outlook for Việt Nam in 2024 and 2025 unchanged at 6 per cent and 6.2 per cent respectively, on the back of a strong first-half performance in 2024.

The forecast was released on Wednesday in the latest edition of Asian Development Outlook (ADO), which periodically provides assessment of recent economic developments in Asia and the Pacific and medium-term macroeconomic projections for the region.

The report said that trade-related manufacturing – one of the main drivers of recovery – is expected to slow down over the near term, while domestic demand will also remain subdued. Inflation is projected to stabilise at 4 per cent.

Shantanu Chakraborty, ADB Country Director for Việt Nam said: “The first half of 2024 was quite impressive, with GDP growth at 6.4 per cent compared to the same period last year. This was mainly driven by strong trade recovery, where exports grew by 14.5 per cent and import by 17 per cent over last year. However, the domestic segment remained sluggish, with final consumption growing by only 5.8 per cent.

“Việt Nam can maintain its growth momentum in 2024 through sustained trade recovery in export-led manufacturing and positive inflows of FDI and remittances, while making more efforts for growth restoration in services, stable agriculture production and domestic consumption recovery.”

He said that though the economy is expected to post solid growth this year and grow at a slightly higher pace next year, the bank sees several external downside risks that could slow down Việt Nam’s momentum, including softened global demand caused by slow economic recovery among its trading partners and continued geopolitical tensions.

Both could slow down the recovery of Việt Nam’s export-led growth and lower pace of normalisation of interest rates in the US and other advanced economies, which would continue to put pressure on the exchange rate. Growth in 2024 also depends on effective implementation of the Government’s fiscal measures and public investment.

“In recent years, the relative slowdown in growth has exposed the risks of structural fragilities in the Việt Nam economy, for example the reliance on FDI-led export manufacturing, the incipient capital markets and overreliance on bank credit, among others. If these risks are addressed in a timely fashion, Việt Nam could achieve stronger growth. Policy measures in 2024 would therefore need to combine short-term growth support measures to strengthen domestic demand with long-term structural remedies to promote sustainable development,” he said.

ADB has also slightly raised its economic growth forecast for developing Asia and the Pacific this year to 5.0 per cent from a previous projection of 4.9 per cent, as rising regional exports complement resilient domestic demand. The growth outlook for next year is maintained at 4.9 per cent.

Inflation is forecast to slow to 2.9 per cent this year amid easing global food prices and the lingering effects of higher interest rates.

After a post-pandemic recovery that was driven mainly by domestic demand, exports are rebounding and helping propel the region’s economic growth. Strong global demand for electronics, particularly semiconductors used for high-technology and artificial intelligence applications, is boosting exports from several Asian economies.

“Most of Asia and the Pacific is seeing faster economic growth compared with the second half of last year,” said ADB Chief Economist Albert Park. “The region’s fundamentals remain strong, but policymakers still need to pay attention to a number of risks that could affect the outlook, from uncertainty related to election outcomes in major economies to interest rate decisions and geopolitical tensions.”

While inflation is moderating toward pre-pandemic levels in the region as a whole, price pressures remain elevated in some economies. Food inflation is still high in South Asia, Southeast Asia and the Pacific, in part due to adverse weather and food export restrictions in some economies.

The growth forecast for the People’s Republic of China (PRC), the region’s largest economy, is maintained at 4.8 per cent this year. A continued recovery in services consumption and stronger-than-expected exports and industrial activity are supporting the expansion, even as the PRC’s struggling property sector has yet to stabilise. The Government introduced additional policy measures in May to support the property market.

The outlook for India, the region’s fastest-growing economy, is also unchanged at 7 per cent for the fiscal year 2024. India’s industrial sector is projected to grow robustly, driven by manufacturing and strong demand in construction. Agriculture is expected to rebound amid forecasts for an above-normal monsoon, while investment demand remains strong, led by public investment.

For Southeast Asia, the growth forecast is maintained at 4.6 per cent this year amid solid improvements in both domestic and external demand.

This year’s outlook for the Caucasus and Central Asia is raised to 4.5 per cent, from a previous projection of 4.3 per cent, driven in part by stronger-than-expected growth in Azerbaijan and the Kyrgyz Republic.

In the Pacific, the outlook for 2024 is maintained at 3.3 per cent growth, driven by tourism and infrastructure spending, along with revived mining activity in Papua New Guinea. — VNS

Fruit, veggie export surges sharply in seven months

Việt Nam’s fruit and vegetable export value in the first seven months of 2024 rose by 23.4 per cent year on year to more than US$3.8 billion.

In July alone, the fruit and vegetable export value was at $477 million, an increase of 18 per cent over the same period in 2023.

According to experts, this export turnover continued to increase due to strong demand from export markets. Of which, increase in export of durian, dragon fruit, and banana contributed to the export value growth.

Việt Nam’s fruit and vegetable exports to major markets all recorded high growth rates. In particular, China continued to be the largest export market for Vietnamese fruits and vegetables.

In the first half of 2024, the fruit and vegetable exports to this market reached $2.16 billion, up 22 per cent over the same period in 2023, accounting for 64.9 per cent of the total.

The second place was South Korea with $164 million, up 54.6 per cent on year. The third was the US with $157 million, up 33.5 per cent.

According to the Việt Nam Fruit and Vegetable Association, the fruit and vegetable export will continue to be favourable until this year end thanks to abundant supply in the harvest season.

Meanwhile, the increasing demand of the world market is hoped to support for Việt Nam’s fruit and vegetable export value to surge to $7 billion for the whole year, $1 billion higher than the plan set by the Ministry of Agriculture and Rural Development. — VNS