Manufacturing Resilience Amid Global Uncertainty

Despite global headwinds, Vietnam attracted $6.9 billion in foreign direct investment during Q1 2025, a 3.2% year-on-year increase. Manufacturing and processing accounted for 72% of registered capital. The data confirms Vietnam's status as the region's most resilient FDI destination.

Headline Figures

The General Statistics Office (GSO) released Q1 FDI data in late March, and the headline numbers exceeded most analysts' expectations. Total registered capital reached $6.9 billion, up from $6.7 billion in Q1 2024. Disbursed capital — the metric that actually reflects money flowing into the economy — was $4.8 billion, a 5.1% increase year-on-year.

What is notable is not just the growth rate but the composition. Manufacturing and processing dominated, as it has for the past decade, but there was also meaningful activity in real estate, wholesale and retail, and information technology. The diversification of FDI inflows, while gradual, suggests that Vietnam is attracting interest beyond its traditional manufacturing base.

Source Markets

Singapore remained the largest source of registered FDI in Q1, accounting for $2.1 billion — approximately 30% of the total. This reflects both genuine Singaporean investment and the use of Singapore holding structures by multinational corporations routing capital into Vietnam. South Korea followed with $1.3 billion, driven primarily by electronics and automotive component manufacturing. Japan contributed $980 million, with significant activity in machinery, chemicals, and consumer goods.

China's direct FDI into Vietnam has become more difficult to track accurately due to the increasing use of third-country structures. However, anecdotal evidence from our client work suggests that Chinese manufacturing investment continues at a robust pace, particularly in textiles, furniture, and electronics assembly. Much of this capital flows through Hong Kong, Singapore, or BVI entities.

European investment, while smaller in absolute terms, showed encouraging growth. The EVFTA continues to drive interest from German automotive suppliers, French consumer goods companies, and Dutch logistics operators. We expect this trend to accelerate as more European firms diversify supply chains away from concentrated exposure.

Sectoral Breakdown

Manufacturing and processing captured 72% of total registered capital, consistent with historical patterns. Within manufacturing, the electronics sub-sector led, followed by textiles and garments, machinery and equipment, and food processing. Notable large-project registrations included a $450 million expansion of an existing electronics assembly facility in Bac Ninh and a $320 million textile dyeing and finishing complex in Quang Ninh.

Real estate accounted for 12% of registered capital, with industrial zone development and logistics warehousing driving most of the activity. The warehousing sub-sector in particular is attracting attention from regional logistics REITs and private equity funds, driven by e-commerce growth and supply chain restructuring.

Information and communications technology represented 6% of registered capital. While small relative to manufacturing, this is the fastest-growing sector on a percentage basis. The activity is concentrated in data centre development, software outsourcing facilities, and semiconductor-related projects.

Provincial Distribution

The geographic concentration of FDI remains pronounced. Bac Ninh province led with $1.4 billion in registered capital, followed by Ho Chi Minh City ($980 million), Hai Phong ($720 million), and Binh Duong ($650 million). These four provinces collectively accounted for 54% of total registered FDI.

However, there are signs of gradual dispersion. Thanh Hoa, Nghe An, and Quang Ninh all saw meaningful project registrations, suggesting that investors are beginning to look beyond the traditional manufacturing belt for lower land costs and available labour. Provincial governments in these emerging locations are actively competing for investment with improved infrastructure and incentive packages.

Outlook for 2025

Based on the pipeline of projects currently in feasibility or application stage, we expect full-year 2025 FDI to reach $24-26 billion in registered capital and $18-20 billion in disbursed capital. This would represent modest growth over 2024 and would place Vietnam firmly in the top tier of emerging market FDI destinations globally.

Risks to this outlook include:

  • Global trade policy uncertainty, particularly regarding US tariff policy and its implications for export-oriented manufacturing
  • Exchange rate volatility, which affects the competitiveness of Vietnamese exports and the returns on USD-denominated investment
  • Regulatory changes that could alter incentive structures or foreign ownership rules
  • Infrastructure constraints, particularly grid capacity and port throughput

Conclusion

The Q1 2025 FDI data confirms what our client conversations have indicated: Vietnam remains an attractive destination for foreign capital, particularly in manufacturing, logistics, and technology. The growth is not spectacular, but it is durable — and in the current global environment, durability may be more valuable than spectacularity.