The country aims to attract approximately US$15 billion and disburse US$11 billion in FDI this year.
Disbursed capital on the rise
Do Nhat Hoang, head of the Foreign Investment Agency (FIA), attributes the January decline to the long Lunar New Year holiday that directly slowed down the licensing of new projects.
The statement is not groundless, as a large number of projects were licensed in February. To name some, the northern port city of Haiphong, about 100km from the capital Hanoi, delivered an investment certificate to a project by Japan’s Bridgestone Company to manufacture vehicle tyres with total capital of US$575 million.
Nghe An province, in central Vietnam, approved a US$30 million project by the Republic of Korea’s BSE Group, to manufacture 250 million electronic products a year.
Binh Duong province, a gateway to HCM City, licensed five projects worth more than US$150 million. Foreign businesses also signed agreements to pour additional hundreds of millions of US dollars into other projects.
FIA reports that by February 20 Vietnam had attracted 65 new projects with total registered capital of US$910.9 million, and 25 operating projects with additional capital of US$320 million.
The agency says several prospective projects are expected to be signed in the coming months. They include a US$200 million Japanese-invested project to manufacture medical equipment at the Vietnam-Singapore Industrial Park in Haiphong city, another Japanese-invested project to invest in industrial parks in Vietnam capitalised at US$200 million, and an AEON shopping mall project in Binh Duong worth US$95 million.
Dr Nguyen Minh Phong from the Hanoi Socio-Economic Development Research Institute says the decline in attracted FDI and disbursed capital in the past two months is not a worrying sign.
The most important thing is that we have seen positive signs in FDI attraction in recent times, says Phong.
According to the specialist, the FDI structure has changed, with investors showing more interest in industrial and agricultural production projects, and less interest in property projects. In addition, many project investors have come from developed countries.
FDI quality – a key factor
Nguyen The Phuong, Deputy Minister of Planning and Investment, says in the coming time his ministry will improve the quality and efficiency of FDI and increase FDI management capacity.
Priority will no longer be given to capital value, but to the quality of FDI disbursement, says Phuong, adding that FDI attraction must go along with socio-economic development plan for the 2011-2015 period.
He stresses that FDI businesses will be encouraged to invest in areas using modern, environmentally friendly technologies, using natural resources effectively, and facilitating links with domestic businesses. In addition, FDI attraction will be focused on the support industries and competitive services with high intellectual content.
Nguyen Noi, FIA Vice Director, states that FDI continues to be an important source of capital for development investment in Vietnam, as the country has been implementing a tight monetary policy and restructuring public investments, resulting in limited access to capital sources.
This is why the government is making every effort to improve the quality and efficiency of FDI, says Noi.
However, FIA points out the challenges Vietnam is facing in attracting FDI. Accordingly, infrastructure development has not kept pace with national economic development requirements, making it hard to attract more investors and ensure FDI businesses operate efficiently.
In addition, Vietnam is short of skilled human resources (HR). A recent survey shows that up to 32 percent of foreign investors consider a shortage of skilled HR as the most important factor hindering their businesses from operating at full steam.
Another challenge is cumbersome administrative procedures. Despite significant improvements in recent times, foreign investors still complain about the time spent and a large number of administrative procedures they have to go through in order to get licences.
Dr Luong Van Khoi from the National Centre for Socio-Economic Information and Forecast says the global economic downturn is casting a shadow over the recovery of economies in 2012, which will certainly affect Vietnam’s economic growth, mostly through investment and trade channels.
Despite gloomy projections, global FDI is predicted to ride out the financial storm, preserving the resource for capital flow into Vietnam.
Experts say to attract more foreign investors Vietnam needs to further improve its investment environment, stabilise its macroeconomy and improve the quality of its HR./.