Vietnam’s strategy to anchor itself as the factory floor of Southeast Asia is working — for now. But the numbers coming out of Hanoi on 9 March show a country taking a hit as global demand shrinks.
Foreign direct investment pledges totalled US$3.1 billion in January and February. That is down 38 percent from the same period a year earlier. The drop is sharp. It is also unsurprising. Export revenue from foreign-invested firms fell 5.3 percent to US$38.4 billion. The United States tech brands are ordering less. Jabil, a contract manufacturer, is doubling floor space outside Ho Chi Minh City anyway. “Clients want resilience, not just cheap labour,” a regional supply-chain director told the Nikkei Asia forum on 2 March.
The money that did arrive went overwhelmingly into factories. Manufacturing absorbed US$2.17 billion of the US$3.1 billion total. That is roughly 70 percent. Metal products, electronics, automotive components — the categories are broad. Real estate took just over US$390 million. Wholesale and retail came third at more than US$200 million. The sector split is no accident. Hanoi has been pushing for years to make Vietnam the centre of the China-plus-one supply-chain shift. Factories are the prize.
The single largest project registered in the period was a Singaporean semiconductor packaging plant worth US$600 million in Bac Giang province. That plant alone accounts for nearly one-fifth of all pledged capital. It also explains where the money is coming from. Singapore led the donor list with close to US$1.2 billion in fresh pledges. Taiwan came second at US$370 million, mostly in footwear and precision plastics. The Netherlands placed third with US$260 million, led by a dairy complex in Long An province. South Korea, Sweden and mainland China added smaller sums.
Disbursement tells a different story. Actual capital put to work slipped 4.9 percent to US$2.55 billion. Pledges are promises. Disbursement is concrete. The gap between the two is widening. That matters because Vietnam needs the projects built, not just announced. The country is competing with Thailand, Indonesia and India for the same factory relocations. A 38 percent drop in pledges raises the stakes.
Global demand is softening. The export numbers prove it. Foreign-invested firms, including crude oil, shipped US$38.4 billion worth of goods in the first two months. That is down 5.3 percent year-on-year. The factories Vietnam is banking on are producing for markets that are buying less. The Jabil director’s point about resilience is not abstract. It is about whether Vietnam can hold onto the factories it has while trying to attract new ones.
Bac Giang province got the semiconductor plant. Ho Chi Minh City got Singaporean capital too. The geographic spread is uneven. Northern provinces are drawing heavy industry. The south is still the hub for consumer electronics and components. Hanoi is not picking winners. It is betting that the overall manufacturing base will keep expanding. The first two months of 2023 suggest that bet is being tested.
