FDI to take hit amid malaise

This means idle capital sources tend to be preserved instead of being invested into new production and business.

Vietnam should bank on lower foreign direct investment next year on the back of an ailing world economy. Minister of Planning and Investment (MPI) Bui Quang Vinh said the worldwide economic situation was expected to be tougher next year and Vietnam’s macroeconomic instability, high inflation and rising production costs put the country under the pump when it came to luring foreign direct investment (FDI) in 2012.

“The world’s economy could get bogged down in a new depression in 2012. This means idle capital sources tend to be preserved instead of being invested into new production and business. Thus, FDI inflows will probably be down,” Vinh said.

A new governmental report on Vietnam’s 2012 socio-economic development orientation has the government targeting VND175 trillion ($8.75 billion) in disbursed FDI next year, or 18 per cent of the country’s total development capital.

Only two months ago, Do Nhat Hoang, director of the MPI’s Foreign Investment Agency (FIA), told VIR that Vietnam was optimistically expecting $15 billion in committed FDI in 2012, with the disbursed sum posting at $8 billion.

Abdul Abiad, deputy division chief of World Economic Studies unit – part of the International Monetary Fund’s Research Department – recently told VIR that the global economy was entering a dangerous new phase because of the public debt crisis in the euro zone. He said the challenge had taken its toll on emerging economies including Vietnam’s. Moreover, it was also very likely that the country’s existing FDI projects and its ability to lure more FDI would be badly affected in the coming months.

During this year’s first nine months, FIA reported over $9.9 billion in the country’s newly-registered FDI, equal to 72 per cent of the corresponding period last year. The disbursed sum, meanwhile, was $8.2 billion, up 0.2 per cent against the same period in 2010. In the beginning of the year, it was forecasted that Vietnam could lure $18 billion of registered FDI this year, with a disbursed sum of $9 billion.

According to the MPI report, during 2006-2010, total disbursed FDI in Vietnam came in at nearly $45 billion, while total registered FDI was $148 billion, 2.7 times higher than during 2001-2005.
“We must have a longer-term vision for FDI attraction, and I believe that FDI in Vietnam will strongly rebound in the near future,” Hoang said. In a similar development, the government said Vietnam’s emergence as a middle-income country had spelled a curtailing of preferential conditions for Vietnam’s official development assistance loans.

Thus it was crucial for the country to look carefully at the most effective way to use ODA in 2012.
“ODA capital in 2012 will be used exclusively for major economic and social infrastructure projects, and environmental protection and climate change projects,” said the government report.

From 2006 to 2010, total ODA commitments for Vietnam came in at over $31 billion, of which 13.8 billion has already been disbursed. Some $2.15 billion in ODA was disbursed in this year’s first nine months and this figure is expected to hit $3.65 billion this year, or 3.1 per cent up against 2010. – VIR

Tags: invest in Vietnam, Vietnam FDI, Vietnam FDI 2011, Vietnam investment