50.6% of FDI Enterprises Will Expand Operation in Next Two Years

According to the PCI-FDI 2016 survey, confidence in the business prospects of FDI enterprises operating in Vietnam is maintained.

Specifically, investors are more optimistic than the period 2012 – 2013, but not as high as in 2010. This is the responses from 1,550 FDI enterprises, coming from 46 different countries and territories operating in 14 provinces and cities of Vietnam, where concentrating the largest number of FDI enterprises, according to the General Statistics Office of Vietnam.

The reason persuading FDI enterprises to expand their investment in Vietnam is that legal changes have created a friendlier legal environment for foreign direct investors. In particular, FDI enterprises assessed that the cost of entering the market and corruption have decreased. This also means that investors who want to enter Vietnam market in the next two years will have a much friendlier environment than before.

This year, PCI-FDI has found interesting new, that is the emergence of nearly 6% of enterprises registered to operate as domestic enterprises.

The number of foreign investors operating in the form of domestic enterprises has increased over time. The reason is that the Investment Law of 2014 stipulates that FDI capital projects in which foreign investors or FDI enterprises holding less than 51% of charter capital will not need to apply for Investment Certificate.

In addition, more than 89% of FDI enterprises participating in the PCI survey are 100% foreign investment enterprises, increased from 87% in 2015. The type of joint ventures only accounted for 7%.

Similar to the results of PCI-FDI survey in previous years, FDI enterprises operating in Vietnam are mostly small-scale and export oriented enterprises, operating in sectors with relatively low marginal interest rates. They often provide goods or services to larger producers or multinational corporations, so they are mostly at the lowest position in the product value chain.

Finding the right business partner in Vietnam is also important. We recommend doing research on the reputation of the company and individual shareholders, corporate or individual, gathering publicly available company information, and performing background checks on key personnel to find potential risks in cooperation. Working with a reliable partner can help achieve economic benefits, saving time and money in business.

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