HomeReportsBureau of Economic and Business Affairs2019 Investment Climate Statements…Vietnam

# 					2019 Investment Climate Statements: Vietnam			

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													Executive Summary											

                -  Executive Summary 
                -  1. Openness To, and Restrictions Upon, Foreign Investment   
                -  2. Bilateral Investment Agreements and Taxation Treaties   
                -  3. Legal Regime   
                -  4. Industrial Policies   
                -  5. Protection of Property Rights   
                -  6. Financial Sector   
                -  7. State-Owned Enterprises   
                -  8. Responsible Business Conduct   
                -  9. Corruption   
                -  10. Political and Security Environment   
                -  11. Labor Policies and Practices   
                -  12. OPIC and Other Investment Insurance Programs   
                -  13. Foreign Direct Investment and Foreign Portfolio Investment Statistics   
                -  14. Contact for More Information   

## Executive Summary

Vietnam continues to welcome foreign direct investment (FDI). In 2018, Vietnam attracted USD 19.1 billion of FDI, a 9.1 percent increase from 2017, while global foreign direct investment fell by nearly a fifth, according to the U.N. Conference on Trade and Development’s (UNCTAD) 2018 report. Vietnam’s 2018 GDP grew 7.08 percent, the highest rate since prior to the 2008 global financial crisis, thanks to strong FDI inflows and growth in the services and manufacturing sectors, productivity, private consumption, and exports.  

Continued strong FDI inflows are due in part to ongoing economic reforms, a young, and increasingly urbanized, population, political stability, and inexpensive labor. Despite the strong FDI inflows, significant challenges remain in the business climate, including corruption, a weak legal infrastructure and judicial system, poor intellectual property rights (IPR) enforcement, a shortage of skilled labor, restrictive labor practices, and impediments to infrastructure investment.

Examples of large investment projects approved in 2018 include a Hanoi-area “smart” residential township with USD 4.1 billion in Japanese investment; a USD 1.2 billion polypropylene factory, a liquefied natural gas (LNG) storage facility, and two electronics factories worth USD 500 million, all by Korean investors; and an additional USD 1.2 billion investment in an existing Singaporean resort.

Vietnam must continue to reform in order to maintain or boost competitiveness in the face of internal factors such as a sustained budget deficit, high debt levels, a weak domestic sector that has low linkages to the global supply chain, low productivity of state-owned enterprises (SOEs), and a financial sector burdened by non-performing loans.

The recently entered-into-force Comprehensive and Progressive Agreement for the Trans-Pacific Partnership (CPTPP) and the EU-Vietnam Free Trade Agreement (EV FTA), if approved, present significant potential benefits for Vietnam.  They are expected to fuel robust economic gains, in the form of more FDI, increased competitiveness of Vietnamese exports, and millions more jobs. These trends may accelerate if foreign companies relocate manufacturing facilities from China to Vietnam due to trade tensions, rising cost of Chinese labor, and China’s shift towards more high-tech industries.  Private-sector analysts predict that the electronics, textiles, shoes, and auto-parts sectors in Vietnam would benefit most. 

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