Industry, real estate attract FDI

Foreign direct investment (FDI) topped US$5.6 billion in the first half of the year, spreading over 455 different projects, with 205 of those industrial projects worth a combined $3.3 billion. Real estate followed closely, with 63 projects worth a total of $780 million. Singapore was Viet Nam’s leading source of foreign investment during the period. The Vietnam News Agency spoke to Do Nhat Hoang, director of the Ministry of Planning and Investment’s Foreign Investment Agency, about the contribution of foreign investment to the nation’s economic growth and how to improve the quality of investment.

The big gap between registered foreign investment and disbursements is always of considerable public concern. What are you doing to improve the the quality and effectiveness of foreign investment and close this gap?

Disbursement in 2008 was $11.5 billion out of a total of $71.7 billion registered investment capital, a ratio of 16 per cent. It reached $10 billion out of a total of $21.9 billion, or 46 per cent, in 2009, and $11 billion out of $19.8 billion, or 56 per cent, last year. So, while registered capital has decreased over the years, the ratio of disbursement has increased. The global financial crisis in 2008 affected the business operations and investment plans of foreign investors all over the world, including in Viet Nam.

The disbursement ratio may not be increasing now due to difficulties in the country’s investment climate. Despite some progress in administrative reforms, shortcomings still exit in administrative procedures and land use policies. In addition, difficulties in capital arrangement and relationships among partners in joint ventures also slow disbursements.

The current structure of foreign direct investment (FDI) is unreasonable. Much of the capital is invested in the real estate sector, with many projects worth of billions of US dollars, while investment is modest in manufacturing, which creates more added value. What can be done to change this?

There are currently 12,776 foreign-invested projects worth $198 billion being carried out in Viet Nam, of which the real estate sector alone accounts for 358 projects worth $48.2 billion. However, according to surveys by the Foreign Investment Agency, the industrial and manufacturing sector still attracts the greatest proportion of FDI capital. In the first six months of the year, FDI inflows in this sector made up 50 per cent of total FDI, with 205 projects worth $3.3 billion.

How are local governments handling the authority that has been vested in them to grant investment licences?

The Government has had the right policy of decentralising administration and licensing in order to create new sources for regions to develop their own internal resources. However, in pursuit of rapid development, many regions have granted licences to poorly-conceived projects, based on inadequate information and appraisals, resulting in a number of slow-to-be-implemented, suspended, or even revoked projects.

Recently, the Ministry of Planning and Investment and local authorities have been more closely reviewing investment projects, particularly their potential impacts on localities. Projects with investors which are financially inadequate will have their licences revoked.

What is the contribution of foreign investment to the nation’s economic development?

Foreign investors have brought new investment modes, arousing internal forces and investment activity in the country. Along the way, the image of Viet Nam as an investment environment has been greatly improved. Foreign investment has also helped us recognise the need to adapt in order to join the global value chain, access international markets and further integrate into the global economy.

Foreign investment also contributes to the State budget, creates more value for the society, promote the transfer of scientific and technological know-how, and create jobs for local people.

What is the outlook for attracting foreign investment this year and in the coming years?

According to the assessments of international organisations, Viet Nam still ranks 8th in the list of attractive investment destinations for 2010-12. In the eyes of Japanese investors, Viet Nam ranks only behind China, Thailand and India as an investment destination.

In the context of the lingering global economic crisis which has crippled investment so far, this is both challenge and opportunity for Viet Nam to further accelerate administrative reforms and improve the investment climate to increase its attractiveness to foreign investors. — VNS

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