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Vietnam will welcome huge FDI capital from the US and EU after a decade of Japanese and Korean capital flows

Changes in international relations and geopolitics could lead to a shift in trillions of dollars in cash flows. Vietnam has the opportunity to welcome large capital flows and achieve huge export value, thereby raising the economy to a new level.

Also read: Korean enterprises pour 1.5 billion USD into investing in Hai Phong, Vietnam

New billion USD cash flow

Ha Tinh newspaper has just reported that on September 28, Ms Antonia Zahn Weber, CEO of Germany's VFT Industry UG Company, discussed with a high-level delegation of Ha Tinh province about constructing a stainless steel factory in Vung Ang Economic Zone.

Accordingly, VFT Industry UG plans to build a stainless steel factory on an area of 250 hectares, with an expected investment of 1.5 billion euros. Steel production capacity is estimated at 1.1 million tons/year.

Ms. Antonia Zahn Weber said that Ha Tinh has many conditions and advantages, such as convenient transportation, abundant human resources, a 137km long coastline, and the largest deep-water port in Vietnam, Vung Ang - Son Duong (which can accommodate ships of over 300,000 tons)... In particular, Ha Tinh is increasingly attracting interest and investment from many large corporations and projects worldwide.

This is the next signal of capital flows from the European Union (EU) into Vietnam. Previously, in November 2022, Denmark's LEGO Group broke ground on a factory construction project worth more than a billion USD at Vietnam - Singapore Industrial Park III in Tan Uyen, Binh Duong province. This is the first large-scale project of the LEGO Group investing in Vietnam, the 6th factory worldwide and the 2nd in Asia.

LEGO's factory in Binh Duong received disbursement quickly and is preparing personnel and labour to go into production in the second half of 2024.

Since Vietnam and the US elevated their cooperative relationship to a comprehensive strategic level, the opportunity to welcome European-American financial flows is becoming increasingly obvious. Trade, currency, and technology wars between major powers, the Russia-Ukraine conflict and the EU-Vietnam Free Trade Agreement (EUVFTA) drive large corporations to diversify their supply chains.

Information from Intel US said that the group poured an additional 475 million USD into the factory in Vietnam at the end of last year, bringing the total investment to 1.5 billion USD. Until now, Intel Products Vietnam is the largest of the four factories in assembly and testing. Currently, the factory in Vietnam produces several microprocessors and performs more than 50% of global output in assembly and testing. American corporations are also and will continue to invest in Vietnam.

Meanwhile, the US Apple Corporation has transferred 11 audio-visual equipment factories to Vietnam.
At the end of March 2023, an unprecedentedly large American business delegation arrived in Vietnam. 52 American companies and corporations, including defence, pharmaceutical, and technology companies... (such as Boeing, Bell, and UPS...) were present to discuss investment and business opportunities.

Many familiar corporations are doing business or manufacturing in Vietnam and have plans to expand, such as Apple, Intel, Coca-Cola, PepsiCo, Netflix, etc...

SpaceX is also looking for the satellite Internet service market in Vietnam and other countries. AES, Visa Finance Company, Citibank, cloud computing technology companies Meta and Amazon Web Services, Google, Walmart, pharmaceutical businesses Pfizer and Johnson & Johnson, energy company AES, medical equipment producer Abbott, and Visa Finance Company all support the hunt for business prospects in Vietnam.

Great opportunity for Vietnam

If 10 years ago, cash flows from Japan, Korea, Singapore, China... poured into Vietnam, then in the new decade, large capital flows will likely come from Europe and the US. Vietnam's export value of 1,000 billion USD was also mentioned.

In Japan and Korea alone, the amount of FDI capital in Vietnam has reached more than 150 billion USD. Future FDI capital from the US and Europe could be much larger.

Besides, capital flows in the financial market will also be very exciting when the stock market is upgraded, possibly as soon as 2024. A new trading system, KRX (based on Korean technology), with large capacity and more products, will be introduced from the end of 2023. A few billion USD will probably be invested in domestic enterprises instead of acquisitions worth a few hundred million dollars.

According to a recent report by VinaCapital, following US President Joe Biden's official visit to Vietnam from September 10 to 11, the two countries upgraded their relationship to a Comprehensive Strategic Partnership (CPS). This marked a significant turning point for their bilateral diplomatic relations.

Accordingly, CPS creates a framework for further cooperation and collaboration between Vietnam and the US in many fields, including economics, trade, investment science, technology, digital, education, energy…

The trend of shifting global supply chains has taken place strongly in recent years. Intel, Apple and many other American and European corporations have also sought and expanded their supplier networks and developed production facilities in many new areas, including India, Indonesia, and Vietnam.

Along with the "eagles", many other corporations also tend to move along, such as Foxconn, Pegatron...
As for the EU, for many years, countries in this region have had their economies heavily dependent on Russia and China, from gas and energy to raw materials and product consumption markets. The vulnerability to European countries, when geopolitical tensions have recently increased, may cause the EU to have more long-term calculations for the future.

Leading international analysts recently asserted that protectionism is not currently the biggest threat to the world economy; rather, geopolitical tensions are. Professor of International Political Economy at Harvard Kennedy School Dani Rodrik also made such an opinion on the Project Syndicate page.

Geopolitics has recently been considered one of the most important factors that can lead to a market crash, or lead to a reversal of capital flows, and financial and liquidity crises...

Capital flows from the US and EU may flow to some emerging economies. Capital flows from Japan and Korea will also continue to find safe harbours.

With the EU, Vietnam has a free trade agreement EVFTA and the Vietnam-US CPS, which will be a driving force to help EU corporations promote investment shifts to Vietnam to take advantage of tax incentives and easily export to America.

In a recent report by HSBC, this organization said that, despite the gloomy short-term prospects in the trade sector, ASEAN continues to attract FDI, reaching a record global market share of nearly 17%.

Also, according to HSBC, many investments have been poured into the region's growing technology, electric vehicle supply chain, and financial activities. Even Chinese investors are increasing FDI investments in ASEAN's diversified manufacturing industries and sub-sectors. Vietnam, meanwhile, is a bright spot in the region.

Read more: Foreign trade value to exceed US$700 billion

Capital flows may leave Vietnam when the State Bank's 'magic wand' stops working

According to the General Statistics Office, realized foreign direct investment capital in Vietnam in the first 9 months of 2023 is estimated to reach 15.91 billion USD, up 2.2% over the same period last year - the highest level in 9 months, from 2019 to present. Registered capital reached more than 202 billion USD, up 7.7% over the same period last year.

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