Last updated: Thursday, May 23, 2013
FDI Attraction: Policy Changes NeededPosted: Monday, April 09, 2012
The Ministry of Planning and Investment said Vietnam attracted US$1.23 billion of foreign direct investment (FDI) in March, equal to the value in the first two months. In total, the country attracted US$2.63 billion in the first quarter of 2012, a decrease of 36.4 percent against the same period last year. Despite the steep slump, this figure is encouraging in the context of global economic uncertainties.
Japan takes the lead
Of the total amount, US$2.26 billion was poured into 120 new projects in the first quarter, a 22.8 percent reduction from 2011, while 29 existing projects registered US$368 million in added capital, or 30.4 percent of last year's figure.
Notably, the real estate sector jumped from the bottom position in the first two months to the top in the first quarter thanks to the US$1.2 billion Becamex -Tokyu Joint Venture between Becamex IDC and Japan's Tokyu Group in the Tokyu Binh Duong Urban Area. The project helped push total registered FDI capital in March to US$1.23 billion, equal to the total registered capital for the first two months of the year, the Foreign Investment Agency (FIA) of the Ministry of Planning and Investment said.
Japan remained the largest investor out of 26 nations and territories in the first quarter of this year, with a total investment capital of US$2.3 billion, accounting for 88.8 percent of total FDI capital in Vietnam. Major Japanese projects included Tokyu Binh Duong Urban Area (US$1.2 billion), Bridgestone Vietnam Tyre Production (US$574.8 million) and Oshima Shipbuilding Vietnam (US$180 million). Following Japan were the Netherlands and Taiwan.
Binh Duong province attracted the most FDI capital at US$1.36 billion. FDI attraction in Hanoi and Ho Chi Minh City was opposite. Northern Hanoi City attracted US$120 million in the January - March period, an increase of 2 percent in projects and a surge of more than 5.9 times in value over the corresponding period of 2011. Ho Chi Minh City had only US$39.95 million FDI capital in the first quarter, down 96.5 percent year on year.
Higher quality of capital flows
Total FDI disbursement in the first quarter reached US$2.52 billion, equal to 99.2 percent of the same period last year. This progress indicated a tough task for Vietnam to realise the target of attracting US$15 billion of FDI capital and disbursing US$11 billion in 2012. To achieve these objectives, Vietnam needs to make fundamental changes in FDI attraction policies. Besides, improving infrastructure and business environment is a huge challenge for the country to overcome to attract more foreign investors.
Especially, according to economic experts, a slowdown in FDI capital flows partially results from the limited quality of Vietnamese human resources which are not qualified for foreign investors’ projects. This thus diminishes the attractiveness of investment environment.
In the coming time, to attract more FDI capital and improve its quality, Vietnam needs to enhance the quality of human resources to increase productivity and meet more sophisticated requirements of investors. This not only gives a boost to FDI attraction efficiency, but also creates a breakthrough in providing high-quality technical workforce for the cause of national industrialisation and modernisation and international integration.
Given that FDI attraction is not as good as expected, especially with unselective investment attraction by provinces and cities in the country, the Ministry of Planning and Investment will give priority to projects using modern, environment-friendly technologies, strengthening sector interrelation, operating in sectors and industries manufacturing products of competitive advantage and products capable of entering global production networks and value chains. Energy-saving, capital-intensive projects will be assigned priority. This is considered the fastest way for Vietnam to raise the quality and productivity of FDI capital.