2016: Opportunities for FDI attraction

09:05 | 27/01/2016 Economy

(VEN) - Good results in terms of foreign direct investment (FDI) attraction brightened the Vietnamese economic picture in 2015. FDI in Vietnam is forecast to remain on the rise in 2016.

2016: Opportunities for FDI attraction

Vietnam attracted US$22.76 billion of FDI in 2015

According to the General Statistics Office (GSO) under the Ministry of Planning and Investment, Vietnam attracted US$22.76 billion of FDI in 2015, a rise of 12.5 percent compared with 2014, and disbursed US$14.5 billion of capital from these sources, up 17.4 percent. “This was the highest FDI disbursement growth thus far, showing the great attraction of the Vietnamese investment environment to foreign investors,” said Minister of Planning and Investment Bui Quang Vinh.

The import, export value of the FDI sector grew strongly in 2015 compared with 2014, with the export value reaching US$115.1 billion, up 13.8 percent, and the import value reaching US$98 billion, up 16.4 percent. While Vietnam faced an annual trade deficit of US$3.2 billion, the FDI sector recorded a trade surplus of US$17.1 billion. GSO Director Nguyen Bich Lam said these results of the FDI sector added bright colors to the picture of the Vietnamese economy in 2015.

The Ministry of Planning and Investment attributed increases in FDI attraction and disbursement to the presence of large-scale projects, including a US$3 billion increase in investment by Samsung Display Vietnam in Bac Ninh Province, the Duyen Hai 2 Power Plant project with total investment of US$2.4 billion by a Malaysian company in Tra Vinh Province, a Ho Chi Minh City-based joint venture project with total investment of US$1.2 billion of the De Vuong Company Limited and its partners. In early December 2015, the Cheng Loong Corporation decided to invest US$1 billion in building a one-million-tonne-per-year industrial packaging plant in Binh Duong Province. Samsung Display Vietnam pledged to disburse its investment in the Bac Ninh Province-based project within two years.

According to Vietnam Association of Foreign Invested Enterprises Vice President Nguyen Van Toan, the investment environment in Vietnam has improved thanks to amendments to the Enterprise Law and Investment Law that were approved in November 2014 and took effect on July 1, 2015, creating new opportunities for foreign investors in the context of economic globalization. In Toan’s opinion, this was another reason behind satisfactory FDI attraction results in 2015.

Prospects for 2016

The Ministry of Planning and Investment predicted that Vietnam would see breakthroughs in FDI attraction and disbursement in 2016. It made this prediction based on the signing and conclusion of negotiations on a number of bilateral trade agreements, including free trade agreements (FTAs) between Vietnam and the Republic of Korea, the Eurasian Economic Union, the EU, and the Trans-Pacific Partnership Agreement. These agreements and the establishment of the ASEAN Economic Community by the end of 2015 would open great opportunities for Vietnam to attract FDI.

According to Minister Bui Quang Vinh, the Vietnamese market will be fully open with almost 100 percent of tariff lines eliminated after the TPP is signed and takes effect. TPP negotiations covered 22 areas, creating opportunities for access to large markets such as the US, Japan, and Canada with import taxes reduced to zero percent. With clearer commitments to improve the investment environment and protect intellectual property rights, Vietnam expects to see a significant turning point in FDI attraction.

Dr. Hoang Van Cuong from the Central Institute for Economic Management said the establishment of the AEC and a number of general agreements regulating investment, trade and services would make ASEAN more attractive to foreign investors. Meanwhile, compared with other ASEAN countries, Vietnam has outstanding advantages thanks to political stability, a large population with working-age people accounting for a high percentage, and positive changes in investment attraction policies - this will bring good opportunities for Vietnam to attract more intra-regional investment.

Integration has created opportunities for Vietnam to attract FDI. In the opinion of economists, however, to improve FDI quality in 2016 and ensuing years, Vietnam needs to pay greater attention to the quality of projects rather than focusing on the number of projects. Dr. Hoang Van Cuong said the government needed to improve its policies in accordance with Vietnam’s international integration process. New laws need to be made in ways that protect investor interests. Administrative procedures need to be simplified to create favorable conditions for FDI businesses in accordance with Vietnam’s commitments in the international integration process.

Notably, to restrict transfer pricing and tax evasion by FDI businesses, the state needs to improve regulations on transfer pricing management. The control over the operations of FDI businesses requires tight coordination between state authorities concerned and tax officials. In addition, FDI disbursement needs to be accelerated. Infeasible projects and the ones that could have a harmful impact on the environment should not be licensed, while it is necessary to concentrate on attracting large FDI projects that could have good effects on domestic businesses.

Minister Bui Quang Vinh emphasized that to attract quality FDI projects, in the time to come Vietnam would pay greater attention to human resources training and development to improve labor productivity along with enhancing the competitiveness of domestic businesses so that they could make the most from cooperation with FDI companies, thus increasing FDI’s good effects on the Vietnamese economy.

Apart from traditional investment partners from Asian countries such as the Republic of Korea, Japan, and Singapore, Vietnam will welcome new investors from the US and European countries in 2016.

 

Nguyen Hoa

Theo ven.vn