Vietnam’s manufacturing sector might be temporarily becalmed amid declining global demand, but its long-term outlook is rosy thanks to FDI, according to experts.
The EuroCham Business Climate Index (BCI), a quarterly benchmark seeking to measure the level of confidence of European companies investing in Vietnam, fell for the third time in a row in the last quarter to 48 points, down 25 points from the first quarter of 2022.
“Things were definitely less positive in the fourth quarter of 2022 than they were earlier in the year,” said Alain Cany, chairman of the European Chamber of Commerce (EuroCham) in Vietnam.
Industrial production is likely to further slow down in 2023, but the country’s economic potential is much higher than its regional and international competitors’, he said.
Many EuroCham members see Vietnam as central to their global investment strategy, he said.
Some 41% of members said in a recent poll they plan to move their operations from China to Vietnam, up from 13% in the third quarter of 2022.
35% said Vietnam is among the top five global investment destinations.
It is encouraging to see that FDI inflows from Europe and around the world remain high and continue to grow, especially in manufacturing and green industries, Cany said.
Recently Reuters reported that Chinese electronics company BOE Technology was planning to invest US$400 million in Vietnam for building two factories.
While negotiating to lease dozens of hectares of land in the north, the company is planning to build a small factory in the South, mainly for making screens to supply to Samsung and LG.
Last year Vietnam attracted $27.7 billion worth of FDI, down 11% from 2021.
However, FDI disbursement in 2022 is estimated at nearly $22.4 billion, up 13.5% year-on-year, making it the highest amount in the past five years.
SSI Securities Corporation said the trend of shifting production from China to Vietnam would drive economic growth in future.
It expected rents on industrial lands to increase slightly with new industrial parks attracting many foreign-invested enterprises.
Industrial real estate rent continued to grow in the last quarter of 2022, according to property consultancy Colliers.
In HCMC the average rent was $204 per square meter, up 2% from the third quarter, even as the occupancy rate rose from 91% to 92%.
Chi Vu, senior manager of industrial services at Colliers Vietnam, said the postponement and cancellation of export orders would surely affect foreign investors’ plans in Vietnam in the short term, but the country “is still seen as a strategic choice for supply chain diversification.”
EuroCham said Vietnam needs to remove legal obstacles to attract more FDI, adding the three biggest barriers for foreign companies include lack of clarity on regulations, administrative difficulties and visa and work permit difficulties.
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