Record FDI Attraction - Increasing Investment outside the Border

 

“Vietnam is witnessing the second wave of FDI into the country, not only the amount of FDI hit a record in 2007, but more and more large scale and hi-tech projects are also finding their way to Vietnam,” affirms Mr Phan Huu Thang, head of the Ministry of Planning and Investment’s Department of Foreign Investment. During the past 20 years, since Vietnam promulgated the first Foreign Investment Law (in 1987), the country has attracted 9,500 FDI projects with registered capital totalling US$98 billion (increased FDI included). 2007 alone attracted a record FDI of US$20.3 billion, up 69.3 percent against 2006. The distributed FDI hit US$4.6 billion, rising by 12.2 percent against the last year and 2.2 percent over the yearly plan (US$4.5 billion). 

 

In fact, areas attracting FDI to Vietnam are becoming more and more diversified. Industry, however, is the sector with the highest FDI attraction in 2007. 2007 FDI is mainly concentrated on key economic areas including industry, construction, electronics, telecommunications and infrastructure build-up for hi-tech areas. Furthermore, such areas as the service sector, urbanisation, industrial parks and processing zones development and agro, forestry and fishery processing are being given special attention by foreign investors.

 

According to economics experts, 2007 was a successful year for hi-tech, with many large projects such as the printed circuit board assembling and testing factory project of Jabil Circuit Ltd. Co (U.S) in Ho Chi Minh City with total capital of US$100 million, and two hi-tech factories of Foxconn Corporation (Taiwan) in Bac Ninh with total capital of US$80 million. Foxconn aims to be the biggest foreign investor in Vietnam with total investment capital surpassing US$5 trillion.

 

There has been a considerable increase in the scale of investment projects. Average capital for one project in 2007 ranged around US$11 million, higher than the previous year. It is worth noticing that investors took special interest in real estate projects. Kien Giang is preparing the site for the Asian Pearl project in Phu Quoc, invested by Trustee Suisse (Switzerland) with €2 billion. Ho Chi Minh City has also signed a Memorandum with Berjaya Land Berhad, Malaysia to construct the International University town with US$3.5 billion. Hanoi has the project to construct Keangnam hotel – luxurious apartment of Korean investors for US$500 million, and projects on park and hotel construction in Yen So Lake area by Malaysian investors with capital totalling US$2 billion. 

 

Ho Chi Minh City has lots of projects granted licences under the decentralisation mechanism. In 2007, Ho Chi Minh City authority granted licenses for 410 projects with estimated capital of US$2.5 billion. Many localities have succeeded in attracting large investment projects from multi-national corporations. Phu Yen, for instance, has Vung Ro oil refinery project of Technostar Management Company (U.K) and Telloil (Russia). Similarly, Vinh Phu has many large-scaled industrial projects such as projects on Vespa motorbike manufacturing of Piaggio Corporation (Italy) or on laptop production of Intelligent Universal (Taiwan), etc.

 

Along side other long-term investors in Vietnam, in 2007 India reached the top ten biggest investors in Vietnam, and Vietnam became the Asian nation receiving the highest FDI from India through the implementation of two big projects: the hot rolled steel mill in Ba Ria Vung Tau with capital totalling US$527 million of ESSAR Corporation, and the Ha Tinh Steel Complex of TATA Corporation. It should be noted that India itself is a nation very attractive for foreign investments. 

 

“Currently, there is a quite impressive list of investors waiting to enter Vietnam until 2010. Road, railway, sea port, electricity plant, hospital and university construction projects are on the list for investment. As such, the capital flow in 2008 is sure to be strong,” adds Mr Phan Huu Thang.

 

According to a recent survey by the Asian Business Council, Vietnam ranks third on investment attraction in Asia in 2007 – 2009, just trailing China and India. Vietnam even surpassed China to rank first in Pricewaterhouse Coopers’ ranking on the attraction of 20 emerging economies in terms of manufacturing. However, to get the new capital flow, it is pivotal that Vietnam further improve the investing environment and pay special attention to the effective disbursement of invested amount. The disbursed capital of US$4.6 billion (25 percent of registered capital) is not up to expectations. So, effective disbursement is among the goals set by the Ministry of Planning and Investment for 2008. 

In 2007, Vietnamese enterprises invested internationally with US$391.2 million registered capital for 64 projects in 18 countries and territories worldwide. On average, each project received US$6 million

Of 35 nations and territories receiving investment by Vietnamese enterprises, apart from some oil projects in Algeria, Iraq and Madagascar, Laos holds the highest cumulative investment with 86 projects and capital of US$583.8 million, accounting for 42 percent of total international investment. Cambodia ranks second with 27 projects and US$88.4 million registered capital, accounting for 6.3 percent. Russia has 12 projects with US$48.1 million total capital, accounting for 5.6 percent of investment.

 

Vietnamese enterprises mainly focus their investments on the agricultural sector (17 projects or 35.9 per cent, and capital of US$156.8 million or 40 per cent). The industry sector follows with 23 projects and capital totalling US$147.1 million, 26 percent and 37.6 percent, respectively. The remaining capital is spent in the service sector. As such, during the past 20 years (1988 – 2007), Vietnam has recorded 249 international investment projects with total registered capital of US$1.39 billion. Several projects have had their licences adjusted and promise success.

 

According to the Ministry of Planning and Investment, in the coming time, Vietnamese enterprises will invest in key areas such as oil (Southeast Asia and Africa), electronics (Laos and China), mineral exploitation (Laos), telecommunications (Laos, Cambodia, Hong Kong, Singapore and the U.S), transportation (Singapore, Hong Kong and Russia), export-import and retail (the U.S, EU, Japan, Singapore and China).