Vietnam has entered the list of top 20 economies that attract most foreign direct investment in the world in 2020, up 5 places compared to 2019.

The Covid-19 pandemic has cast a shadow over the world’s economy since 2020, causing severe disruptions to the global supply chain. The pandemic is also considered the cause of a sharp decline in international investment flows.

As noted by the United Nations Conference on Trade and Development (UNCTAD), global FDI inflows have dropped by about 35% to just $1 trillion, compared with $1.5 trillion in 2019.  The decline was recorded mainly in developed countries, while capital flows to developing countries, especially in Asia, has witnessed a recovery since the second half of 2020. Research in November 2020 of UNCTAD shows that FDI investment in Asia was only about 12%, and that of China experienced a positive growth of 2.5%. Investment capital from China also remained stable at $133 billion, making it the largest investor in the world.

2020 is also a time when ASEAN countries as well as India or Bangladesh implemented many new policies to absorb capital flows which were diverted by the Covid-19 pandemic and the US-China trade war.  A worrying trend in FDI is the sharp decline in many investment sectors related to sustainable development, including infrastructure, health, education, renewable energy, agriculture, etc.

Top most attractive economies

Notably, in 2020, Vietnam jumped to the 19th position in the ranking of most attractive economies in the world (attracting the most FDI) with a total FDI capital of $16 billion. In 2019, Vietnam ranked 24th.   The US is still the world’s leading economy in attracting FDI ($156 billion) though the total FDI capital into this country decreased heavily from $261 billion in 2019. Following are China with $149 billion, Hong Kong with $119 billion and Singapore with $91 billion.

UNCTAD forecasted that global FDI would bottom in 2021, then gradually recover at 10-15%. By 2022, the total FDI capital in the world may fully recover at $1.5 trillion.

Asia will continue to be an attractive destination for FDI. This is explained by the strong growth as well as the resilience of the local value chain.

In the new context of international investment, multinational enterprises have 3 options to restore supply chains, including investment diversification, business flexibility and long-term investment in sustainability.

Bonny Le – VietnamCredit

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