It has been found that Vietnam has recorded an average annual economic growth rate of 6.8% since 1990 based on a rapid increase in foreign direct investment (FDI). The FDI in the country has soared since 2007 in particular. Specifically, the amount reached US$11.8 billion in 2015 and totaled an all-time high of US$15.8 billion last year. In addition, the amount reached US$7.72 billion in the first half of this year alone.
Last year, the FDI in Vietnam that was made by South Korean companies totaled US$2.7 billion and South Korea became the largest investor in the country. South Korean companies’ FDI in Vietnam and the volume of mutual trade between South Korea and Vietnam have skyrocketed since their FTA was implemented in December 2015.
Vietnam’s attractiveness as a destination of investment is because of low labor costs and its geographical proximity to China and Southeast Asian countries. In addition, more than 70% of its population are aged 15 to 64. Although the FDI in the country is currently concentrated on its manufacturing sector, its infrastructure sector is also promising as demands for infrastructure are on the rise based on economic development. The Vietnamese government is planning to make an infrastructure investment of US$500 billion until 2025.
According to investment banks, the Vietnamese economy is expected to grow 6% to 7% a year for 10 years to come on condition that its export growth rate and the large FDI in it are maintained. During the past five years, the total exports from Vietnam increased at an annual average of 11.5%. “South Korean companies can have more and more opportunities in Vietnam with the Vietnamese government planning to privatize state-run enterprises one after another,” the International Finance Center explained.