Favorable prospects for FDI recovery

06:00 | 18/05/2020 Investment

(VEN) - Vietnam has scored highly over its handling of the Covid-19 pandemic, with the safety measures it implemented being of particular interest to foreign investors at this time. Many foreign direct investment (FDI) firms have expressed optimism regarding the Vietnam economy in the medium and long term, and even plan to increase their involvement in the country.

favorable prospects for fdi recovery

Nearly 1,000 new projects licensed

According the Ministry of Planning and Investment (MoPI), Vietnam attracted US$12.33 billion in FDI in the first four months of 2020 (as of April 20), equivalent to 84.5 percent of investment in the same period last year. Although newly registered and adjusted investment capital increased compared to a year ago, capital contributions and share purchases by foreign investors dropped sharply, resulting in the decline of total FDI capital.

However, the Foreign Investment Agency (FIA) under the MoPI said the figure was much higher than recorded during the same period in 2018, 2017 and 2016 by 52.3 percent, 16.4 percent and 79 percent, respectively. In the first four months of this year, 984 new foreign-invested projects were licensed with a total registered capital of US$6.78 billion, up 26.9 percent in value year-on-year.

Among the newly licensed projects, the Bac Lieu LNG-to-power project was the first billion-dollar project of 2020 with investment capital of US$4 billion, accounting for 59 percent of the total registered FDI, the FIA explained.

Meanwhile, 335 existing projects were allowed to raise their investments by more than US$3.07 billion, surging 45.6 percent over the same period last year with the Petrochemicals Complex project in Ba Ria-Vung Tau Province accounting for nearly US$1.39 billion of the total. In the first four months, foreign investors spent US$2.48 billion buying shares or contributing capital to Vietnamese firms, down 65.3 percent year-on-year. The average capital contribution and share purchase value was only US$0.77 million, much lower than that in previous years.

Economic expert Can Van Luc said the decrease in capital contribution and share purchase stemmed from strong investor selling in the stock market. However, the decrease was still the lowest compared to other countries like Thailand, the Philippines and India.

According to the agency, FDI disbursement reached US$5.15 billion in the four months or equivalent to 90.4 percent of last year’s corresponding period.

Positive signals

The Covid-19 pandemic has affected the global economy and the Vietnamese economy is no exception. The World Bank and the Asian Development Bank have lowered their forecasts for Vietnam’s GDP growth. However, Vietnam is expected to achieve the highest growth in the region. Many FDI firms have also expressed optimism for the economy in the medium and long term. According to a survey conducted by the German Business Association (GBA) in Vietnam, 90 percent of surveyed businesses do not intend to reduce their engagements in Vietnam, and half of them even plan to increase their business in the country.

“We observe a strong management of the Covid-19 crisis by the Vietnamese government,” said GBA Chair Erik Peter Moeller. “If such strong, reasonable measures will be continued in the future and urgent economic support measures are provided, then we believe that Vietnam has a potential to recover strongly, and remains one of the most attractive markets for future foreign investment, particularly German investment.”

Thus, Vietnam’s advantage in post-pandemic FDI attraction stems from its effective control of Covid-19. Another advantage lies in the US-China trade war that has led some investors to move their business to other Asian countries. Vietnam could be the biggest trade war winner thanks to its potential for economic development, effective epidemic control and government commitments to improve the business and investment environment. The Europe-Vietnam Free Trade Agreement (EVFTA) scheduled to be ratified this coming summer will also create momentum for EU investment capital.

FIA Director Do Nhat Hoang said the government needs to implement support policies for FDI enterprises affected by the epidemic to prepare for the recovery of FDI inflows after the pandemic.

Singapore was Vietnam’s largest source of FDI in the first four months of 2020 with US$5.07 billion. Thailand and Japan were the runners-up with US$1.46 billion and US$1.16 billion, respectively, followed by China, Chinese Taipei and the Republic of Korea.

Thu Phuong