Foreign direct investment declines

Few improvements in the investment climate are to blame for the reduction in foreign investment into the country in the first half of the year, industry insiders have said.

Figures from the Ministry of Planning and Investment’s Foreign Investment Agency showed that total registered FDI capital for 455 foreign-invested projects along with capital added to existing projects reached over US$5.6 billion in the first six months of this year, equivalent to just 56.7 per cent of the same period last year.

Reaching the target of $20 billion worth of FDI set for the year will be difficult, the department said.

Economist Le Dang Doanh said aside from volatile and unpredictable policies few reforms had been made in the investment environment in Viet Nam, noting that reform must be efficient and can stabilise the macro-economy to be able to attract FDI flow into the country.

Experts said despite being a large labour market attractive to foreign capital sources, Viet Nam can easily lose out opportunities due to its investment environment.

The recent instability in macro-economic policies has uncovered several weaknesses, causing investors to delay their decisions to do business, they said.

They attributed the decline in pledged FDI capital and the rate of FDI disbursement over the past six months largely to the big impact of the slumping domestic market as well as soaring input costs and an unstable macroeconomy.

The World Bank estimated in a report on Viet Nam’s economic development that the fall in FDI funds stemmed not only from the impact of the global economy but also from such macro-economic instability, power shortages and a scarcity of skilled labourers, among others.

A survey by the European Chamber of Commerce (EuroCham) on the second-quarter investment environment showed that EuroCham business members said their confidence in business prospects in Viet Nam was dropping because of the lack of improvement in macro-economic policies.

EuroCham President Alain Cany said if improvement was not made effectively then Viet Nam could lose its attractiveness compared with other ASEAN countries. — VNS

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