Foreign direct investment in Vietnam climbed 9.1% in 2018 to reach $19.1 billion, the government reports, marking a sixth straight annual record as capital keeps flowing into one of Southeast Asia’s fastest-growing economies.

Industries such as apparel have been moving production out of China and into Vietnam looking to escape the higher U.S. tariffs. A prolonged trade war is expected to accelerate this shift.

Vietnam is Asia’s biggest beneficiary of the Sino-U.S. trade war, according to Mizuho Research Institute, which estimates the effect will be a 0.5 percentage point boost to its real gross domestic product.

Though investment approvals fell 1.2% in 2018 to $35.4 billion for the first decrease in four years, the dip may be due to the figure not including the large fossil-fuel power plant projects in central and southern Vietnam that received green lights in 2017.

Japan led all nations in 2018 with FDI approvals for Vietnam totaling $8.5 billion. South Korea ranked second at $7.2 billion, followed by Singapore, Hong Kong and mainland China.

Vietnamese real GDP growth is estimated at 7.08%, according to government data. But heavy economic reliance on foreign companies represents a concern. South Korea’s Samsung Electronics accounts for roughly 25% of Vietnam’s overall exports by value.

“For sustainable growth, Vietnam needs to ease its dependence on foreign capital,” said Hiromasa Matsuura, an economist at Mizuho Research Institute.

Vietnam, with a population of nearly 100 million, ranks third among the 10 members of the Association of Southeast Asian Nations, trailing just Indonesia and the Philippines. The country’s middle-income population is expanding in large cities, including the capital and the southern commercial center, Ho Chi Minh City.

Source: Nikkei Asian Review

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