Export, FDI figures looking good

09:55 | 11/08/2017 Economy- Society

(VEN) - The Institute of Chartered Accountants in England and Wales (ICAEW) recently forecast that the Vietnamese economy would grow more than 6.5 percent in 2017 due to steady increases in exports and foreign direct investment (FDI).  

export fdi figures looking good

Challenges remain

At the presentation in Hanoi of the “Economic Insight 2017 - South East Asia Q2” report, ICAEW Economic Advisor Priyanka Kishore said studies conducted by the institute show that Vietnam’s gross domestic product (GDP) grew 6.2 percent in 2016 and is forecast to grow 6.5 percent this year due to strong increases in exports and FDI.

In recent years, the development of the FDI sector has been a major factor fostering the growth of the Vietnamese economy, reaching US$24.4 billion in 2016, up nine percent compared with 2015. In the first half of this year, total FDI in Vietnam, including newly registered projects, increases in the capital of ongoing projects and stock purchases, reached US$19.22 billion, up 54.8 percent compared with the same period in 2016. These results reflect Vietnam’s attraction for foreign investors thanks to a number of advantages, including lower-cost textile supplies, garments and additional industrial products compared with other countries in the region.

Continuous FDI flows to Vietnam show the growth potential of this market. However, the Vietnamese economy still faces risks despite its growth forecast for 2017. Specifically, the state budget deficit remains high, and the ratios of public and foreign debt to GDP had reached 64.7 percent and 53.6 percent, respectively, by the end of 2016, Priyanka Kishore said.

Speaking at the event, Dr. Tran Dinh Thien, Director of the Vietnam Institute of Economics, said Vietnam’s policies have yet to make the most of the FDI potential. While offering foreign investors considerable incentives, the linkages between FDI and domestic businesses are very weak and foreign-invested companies have to import production materials, instead of relying on locally produced materials.

Dr. Thien cited Intel and Samsung as examples. The local content rates of these two groups are very low, three percent and eight percent, respectively. Intel and Samsung’s low-skilled workers are paid low salaries and face the risk of losing their jobs due to automation and the fourth industrial revolution.

Maintaining growth rhythm

Regarding the prospects for economic growth in 2017, Dr. Thien said the government had put in place appropriate policies to deal with important matters, such as the state budget deficit, public debts, bad debts, and budget expenditure reforms. The government has shown its determination to build a constructive government to serve businesses and people. It has launched a “Start-up Nation” campaign and adopted the plan to restructure state-owned enterprises in the 2016-2020 period. Further, the government is encouraging investment in high-tech agriculture and tourism development. These efforts will create a driving force for the Vietnamese economy to achieve its growth targets for 2017 and ensuing years.

Vietnam remains a bright spot on the regional economic picture, with its GDP growing 6.2 percent in 2016 and expected to increase more than 6.5 percent this year. In the medium term, the Vietnamese economy is forecast to grow 6.7 percent in 2017-2018. Priyanka Kishore believes the growth of the private sector and infrastructure development programs in the fields of transport, telecommunications and energy will help Vietnam maintain its economic growth.

From the viewpoint of a foreign investor, Jonathan Moreno, Chairman of the American Chamber of Commerce (AmCham) in Vietnam, has seen improvements of the investment environment in Vietnam. But, in his opinion, it still lacks transparency, and Vietnam should offer more preferences to foreign investors in specific fields, such as clean energy and environment, especially those from the US, to attract more investment.

According to Takimoto Koji, Chief Representative of the Japan External Trade Organization (JETRO) in Ho Chi Minh City, JETRO’s surveys show that 62.8 percent of Japanese businesses in Vietnam are profitable, and this is why 60 percent of Japanese companies say they will increase investment in the Vietnamese market in 2017. Japanese investment in the manufacturing industry is forecast to decrease, while investment in consumer goods, processed food, trade, services and high technology is predicted to increase rapidly. Therefore, FDI in trade and services will grow - a trend in line with Vietnam’s goal to enhance the quality of foreign investment flows.

The Ministry of Planning and Investment’s National Center for Socioeconomic Information and Forecast predicted that the Vietnamese economy will undergo positive changes in the second half of 2017. The foundation for Vietnam’s economic growth is supported by good prospects of the global economy. These include positive signals from major economies that can help Vietnam promote exports to large markets to achieve a recovery in trade growth; improvements of the investment and business environment, international economic integration; and the expansion of production and business activities.

Ngọc Thao