Foreign Direct Investment In Vietnam And Foreign Portfolio Investment – Advantages And Disadvantages

22/01/2022
Currently, investments can be done within a single country or across borders. There are two types of foreign investment, direct investment, and portfolio investment by either an individual or organization to form assets. Also, Foreign Direct Investment in Vietnam plays an important role in country economic and often claimed to be an important source of capital necessary for industrialization. This article will introduce in detail Foreign Direct Investment in Vietnam, and introduce about country investment so that we can better understand these two types of investment in Vietnam

1. Foreign Direct Investment in Vietnam

Foreign Direct Investment (FDI), is a type of investment in which the investor will finance a company or project in another country. At the same time, the investor will directly participate in part or the whole process of operating and managing the business of the company and that project. FDI is recognized only when the investor owns at least 10% of the total shares in the company. Direct investment also includes the investor transferring advanced technology and management experience to the host country. Vietnam is one of the countries that actively encourages foreign direct investment (FDI).

Foreign direct investment in Vietnam has the advantage of allowing foreign investors to participate in the operation and management of projects in Vietnam. Investors can both take the initiative and have the right to decide on how the capital is used. The form of FDI investment is disadvantageous if foreign investors do not understand the business environment of the host country, resulting in inefficient business and capital utilization.
WHA is a foreign direct investor in Vietnam

2. Foreign Portfolio Investment in Vietnam

Foreign Portfolio Investment (FPI) is that investors purchase financial assets in other countries. Such financial assets can be stocks, bonds and fund certificates. With FPI, the investor has no direct involvement in the business activities operation, and management of the enterprise or the project.

The advantage of FPI is that the risk is quite low because the assets are distributed across multiple channels. However, compared to FDI, the investors of foreign portfolio investment cannot take the initiative in using capital. The profit earned will be determined by the company's operations as well as the invested project in the country.

3. Similarities and differences between FDI and FPI:

- Imilarities:

These two types of investments have one thing in common: they both invest capital in another country. The purpose of the investment is to earn profit through investing in a company or project that has profit potential.

- Differences:

The basic difference between FDI and FPI is that with foreign direct investment in Vietnam, the investor is entitled to participate in business activities management. Meanwhile, foreign portfolio investment cannot involve in the management and business process. With direct investment, there is technology transfer or management experience exchange from foreign investors, whereas indirect investment is only reflected in capital contribution. FDI capital is moved from developed countries to developing countries, FPI capital is rotated between developed countries or developing countries. 
Foreign direct investment in Vietnam includes the transfer of technology and management experience to a business in Viet nam. 

The capital of foreign direct investment in Vietnam from foreign investors in recent years has always maintained a high level. When investing directly in Vietnam, investors receive many tax incentives as well as the advantage of abundant labor resources. WHA is an investor with more than 30 years of direct investment experience from Thailand to Vietnam. As a developer of industrial park and utilities, WHA provides industrial park infrastructure and services with international standards. In addition, WHA Digital Platform is a platform that provides interfaces, data solutions, and supports business customers in operating smart business activities. These factors assist enterprises who need to hire factories and the nations receiving investment as Vietnam.

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