Ho Chi Minh City forecast to attract $7.4 billion in FDI this year
Although the available industrial land in Ho Chi Minh City has shrunk significantly in recent years, foreign direct investment in the city remains top across the country.
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According to the report of the Ho Chi Minh City Department of Planning and Investment, in the first month of 2023, the total newly registered capital, adjusted and contributed capital to buy shares and buy contributed capital of foreign investors in the city reached over $179.04 million, over 173 per cent over the same period in 2022.
It is considered a bright sign for one of the locomotives of the national economy, as Ho Chi Minh City faces an increasing challenge in attracting foreign direct investment (FDI) because the amount of industrial land is becoming narrower, and due to many barriers in administrative procedures.
In January 2023, there were 50 newly registered foreign-invested projects worth $86.86 million in Ho Chi Minh City. As the result, more than half of the FDI capital into Ho Chi Minh City in January was adjusted and contributed capital to buy shares and contributed capital.
Notably, in 2022, only over $601 million of more than $3.94 billion in FDI to Ho Chi Minh City came from investing in new projects. The remaining $3.34 billion came from adjusted and contributed capital to buy shares and buy contributed capital.
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It is understandable that Ho Chi Minh City attracts FDI mainly from raising capital and contributing capital to buy shares because the land to develop industrial projects in the city is limited. In 2023, Ho Chi Minh City only has 46 hectares of clean land funds to attract investment in industrial zones, which is little compared to investor needs.
Because of the lack of land funds in the past two years, FDI inflows into Ho Chi Minh City have tended to decrease the proportion of investment capital in the real estate business, increasing the proportion of specialised activities, science, technology, manufacturing, and processing.
With positive FDI attraction results in the first month of 2023, a representative of the Ho Chi Minh City Department of Planning and Investment said that if the socioeconomic situation becomes more stable, and inflation continues to be controlled, Ho Chi Minh City is expected to attract $4.1-4.5 billion of FDI in 2023.
Regarding the ability to attract FDI into Ho Chi Minh City in 2023, the representative said that the city faced unfavourable factors because the land for industrial development is limited, so it is not possible to receive new projects that require large land funds. In addition, high input costs, difficulties in recruiting workers, and connecting between infrastructures are barriers to attracting FDI in Ho Chi Minh City.
The city's upcoming strategy is to focus on attracting supply chains to the region, in which Ho Chi Minh City holds the role of an important part of the supply chain, such as the headquarters, research and development (R&D) centre, logistics centre, and centre of training, thereby enhancing production activities to neighbouring provinces.
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