Prospects Of Attracting FDI From European Enterprises Into Vietnam In 2024

As of July 20, 2023, Vietnam attracted nearly 29 billion USD in foreign investment from the EU with 2,515 ongoing projects. According to EuroCham’s survey, 31% of European businesses plan to expand their workforce, and 34% of businesses intend to increase investment in Vietnam in 2024.

The current situation of European FDI in Vietnam

According to statistics, the proportion of FDI registered capital of the EU in Vietnam has increased from 5% of the total average registered capital in the period 2016 – 2020 to 8.9% in 2022 and 9.2% in the first six months of 2023. As of July 20, 2023, Vietnam attracted nearly 29 billion USD in foreign investment from the EU with 2,515 ongoing projects. This helps the EU rank as the sixth-largest investor in Vietnam in 2023.

In 2023, the Netherlands led 427 projects with 14.1 billion USD of total investment, accounting for 49% of total investment from the EU into Vietnam. Next, France is in the second position with a total investment of 3.8 billion USD, accounting for 13%; Germany has 456 projects with a total capital of 2.5 billion USD, accounting for 9% and Denmark has 163 projects registered with 1.97 billion USD, accounting for 7%.

EU businesses investing in Vietnam concentrated mainly in big cities with developed infrastructure including ports and airports such as Hanoi, Quang Ninh, Ba Ria – Vung Tau, Ho Chi Minh City, Binh Duong, Dong Nai. The top 5 industries that received the most investment from the EU included manufacturing and processing industries, automobile and motorbike repairing, wholesale and retail, science and technology, information and communication, education and training.

Some big European factories in Vietnam include Lego (Denmark), Shell Group (Netherlands), Total Elf Fina (France – Belgium), Daimler Chrysler (Germany), Siemens and Alcatel Comvik (Sweden).. .

Why are more and more European businesses investing in Vietnam?

Vietnam is considered as a country with stable and sustainable economic growth. According to the World Bank, Vietnam’s GDP is expected to increase by 6% in 2024 and be one of the economies with the highest economic growth rates in the world. This brings many opportunities for FDI enterprises, especially European enterprises investing in Vietnam.

In addition to possessing an abundant labor source and being a trade gateway of Southeast Asia, Vietnam also attracts European investors with incentives in the EVFTA signed on June 30, 2019. The EVFTA officially took effect from August 1, 2020, contributing to strongly promoting investment from Europe into Vietnam.

Vietnam signed the EVFTA with European Union countries

EVFTA brings many benefits to businesses on both sides, such as Vietnam eliminating import taxes as soon as the Agreement took effect on 48.5% of tariff lines which is equivalent to 64.5% of import turnover from the EU. After 10 years of the agreement taking effect, the EU will eliminate about 99.2% of tariff lines and Vietnam will eliminate 99.8% of tariff lines from the EU. Thus, European businesses investing in Vietnam will enjoy a tax rate of 0% on imported goods originating from Europe, and be exempt from export tax up to 100% when exporting from Vietnam to EU countries.

In addition to incentives of EVFTA, European FDI enterprises investing in Vietnam also enjoy incentives issued by the Government such as additional tax exemption for 2 or 4 years, 50% reduction income tax from 4 to 9 years according to Decree No. 218/2013/ND-CP, exemption or reduction of import/export tax to ASEAN countries under the ATIGA agreement, and exemption or reduction of land use fees according to the provisions of Decree 135/2016/ND- CP.

For British and Irish businesses, Vietnam also signed the UKVFTA agreement to help businesses reduce tariffs on 99% of goods in trading between Vietnam and the UK. In particular, some garment and footwear products enjoy import and export tax of 0% according to UKVFTA regulations, bringing great commercial advantages to FDI enterprises in Vietnam.

Investors’ expectations for Vietnam

According to EuroCham’s survey, 59% of businesses participating in the survey said that administrative procedures are major challenges when operating in Vietnam. Besides, obstacles such as uncertainty in the rules, difficulty in obtaining permits, and strict visa requirements for foreign workers are also issues that many businesses are concerned about.

To make investment in Vietnam more favorable, 58% of businesses in the survey said that streamlining administrative procedures is the most important factor, 48% of that supported enhancing legal environment, One-third of that expect Vietnam to upgrade its transportation infrastructure and 22% of that wish to relax visa and work permit requirements for foreign experts.

In addition, European investors also expect Vietnam to promote the development of a green economy, circular economy, and build eco-industrial parks. They also expect suppliers in Vietnam to comply with EU regulations on sustainable development so that investment activities in Vietnam become more favorable and developed.

See more: DELCO cooperates with Investor of DAINESE to design and construct M&E systems and smart factories

Solutions and commitments of Vietnam

To promote attracting investment from Europe, Vietnam has proposed a number of solutions to reduce administrative procedures such as eliminating procedures for establishing industrial parks according to Decree No. 35/2022/ND-CP. Vietnam promotes the development of green industrial parks, aiming for a circular economy and sustainable development with a commitment to achieve zero net emissions by 2050.

Vietnam has committed to eliminating import taxes on a number of main products such as cars with large displacement engines after 9 years, chemicals after 7 years, alcoholic beverages up to 10 years, machinery and equipment up to 7 years since the agreement took effect. With this commitment, European businesses will reduce their tax burden as well as receive more incentives when investing in Vietnam.

Forecast of FDI from European enterprises into Vietnam in the future

In EuroCham’s survey, 62% of European businesses chose Vietnam as the top 10 best investment destinations globally, of which 17% of European businesses ranked Vietnam in the highest position. FDI capital from Europe investing in Vietnam is increasing, focusing mainly on food business fields; agricultural and aquatic products; nutritional foods; medicine; manufacturing machinery, equipment and high technology… According to EuroCham, 31% of businesses plan to increase their workforce and 34% of businesses intend to increase investment in Vietnam in 2024.

Vietnam promotes the development and expansion of green industrial parks and ecological industrial parks, typically Dinh Vu industrial park in Hai Phong, Hoa Khanh industrial park in Ho Chi Minh City, Amata industrial park in Can Tho , Hiep Phuoc industrial park in Dong Nai and Tra Noc industrial park in Da Nang. These 5 eco-industrial park projects will be the foundation to help Vietnam continue to develop the green industrial park model and attract more investors interested in green economic issues.

In addition, Vietnam also focuses on providing solutions to upgrade transport infrastructure and industrial park infrastructure, attracting European businesses to invest in the construction of roads, highways, and airports.This facilitates domestic and foreign trade. Infrastructure in industrial parks is also focused, ensuring the provision of high-quality factory systems, electricity, water, internet systems… to fully meet the needs of businesses.

As the design – construction general contractor of many FDI projects in general and European projects investing in Vietnam in particular, DELCO has extensive experience in providing smart factory solutions, saving energy and fuel, helping many investors optimize time, costs with many positive feedback from customers.

“Even when giving not so specific information about the specification requirements, DELCO helped us a lot to develop a good solution, understand what were our needs. They were thinking as they are the customers, not a supplier. Working with DELCO team is quite easy.
All DELCO team members are always available to talk about every kind of problems we’re facing. And I really appreciate the flexibility in their approach. Even sometimes our target is changing, so changes in the factory construction plan are inevitable, but DELCO were very supportive to change and adjust the project, they support us 100%”
Mr. Fabio Bianchin – CEO DAINESE VIETNAM