Mainland China is now a leading economic engine of the world but its investment flow into Vietnam remains modest in relation to potentials, strengths and deep relations of the two countries.
Not a big investor
According to Nguyen The Phuong, Deputy Minister of Planning and Investment, China’s foreign direct investment (FDI) valued at US$2.92 billion as of the end of June 2010.
According to incomplete statistics, some 2,000 Chinese enterprises are investing in Vietnam. This is a big volume of business presence in Vietnam compared with other nations. However, China now ranks only the 15th out of 91 countries and territories investing in the Southeast Asian nation.
A number of large Chinese-invested projects are being carried out in Vietnam, including a US$180 million steel ingot plant invested by Fuco Co., Ltd in Phu My Industrial Park 2, Ba Ria - Vung Tau province. Some other projects with individual registered capital of US$100 million upwards are investing in hotel, industrial park and export processing zone projects in HCM City, Hai Phong and Lao Cai.
However, China is not a big investor in Vietnam if other economic indicators and advantages are taken into account, including mutual relationships, geographical proximity, and two-way trade turnover. In addition, although the ASEAN - China free trade agreement (ACFTA) is giving a boost to the flow of Chinese goods into Vietnam, Chinese investment seems not to improve much. Many Chinese researchers in Vietnam pointed out that this was not the fact because Chinese fast-growing special economic zone like Shenzhen, Shantou, Xiamen and Zhouhai are at the mercy of transferring technologies to other nations to adopt higher ones and Vietnam or other ASEAN nations are potential partners for China to achieve this target because of geographical proximity and cultural harmonies.
Given Chinese companies are very active and responsive and the scale of Chinese economy is rapidly expanding and going global, why is the neighbouring Vietnam with many cultural similarities and large trade revenue not a top investment destination for China? According to many Chinese enterprises, China is focusing on being main foreign contractors in Vietnam. China has set out four foreign economic development contents namely trade, investment, ODA grant and tendering. When Chinese companies win overseas bids, they will bring machines, equipment and personnel to their projects. Equipment and manpower export helped lower bidding prices. Thus, Chinese contractors offer lower costs than contractors from many other countries. "China is a trading partner of 220 countries, a project contractor in 180 countries and territories, an ODA granter in 90 countries and an investor in 129 countries. All four economic cooperation contents are available in Vietnam,” said Dr Do Tien Sam, Director of Chinese Study Institute. He said the status of being the largest foreign contractor in Vietnam is also in the main objective of Chinese government. Asia is the stepping stone for Chinese EPC contractors before stepping into other markets like Africa. Hence, China is now an EPC contractor for many big projects in Vietnam like Hai Phong thermal power project, Sinh Quyen bronze producing and refining factory construction project in Lao Cai province, Nhan Co and Tan Rai alumina production plants in Dak Nong and Lam Dong provinces, etc.
In addition, Chinese companies feel worried about Vietnam investments because of their limited understanding about the Vietnamese market and fears of incomplete and changeable legal system in Vietnam. Some Chinese businesses prefer Cambodia and Laos investments to Vietnam because Vietnam's goods are not completely free of tax and export quotas in key markets like Europe and the U.S.
Hence, to draw investment capital from China, Vietnam needs to do many things like eradicating trade barriers, legal system reform, etc.
Anh Phuong
Vietnamese
