FDI drop not to be taken in isolation

08:12 | 21/03/2015 Investment

(VEN) - Total new and supplementary foreign direct investment (FDI) capital reached US$1.192 billion in the first two months of this year, a drop of 22.5 percent compared to the same period last year. However, Minister of Planning and Investment Bui Quang Vinh said that assessing FDI attraction needs to base on the whole process.

FDI drop not to be taken in isolation

Difficult beginning

According to the Ministry of Planning and Investment’s Foreign Investment Agency, as of February 20, 148 projects were granted investment license with total registered capital of US$712.29 million, equal to 85.7 percent of a year ago. In the first two months of this year, each newly registered FDI project just reached US$4.81 million in capital on average.

The first two months of this year also witnessed 58 investment projects that increased their capital with the amount of US$480.5 million, equal to 67.8 percent of a year ago. In general, total new and supplementary FDI capital reached US$1.192 billion in the first two months of this year, a drop of 22.5 percent compared to the same period last year.

Among the three outstanding projects that received investment licenses in the first two months of this year, two projects increased their capital, including the Hong Kong, China’s Regina Miracle International Vietnam Company project and Japan’s Chuo Vietnam Company project in Hai Phong with additional capital of US$90 million and US$50 million, respectively.

The largest FDI project was the British Virgin Islands’ US$300-million Worldon Vietnam Company project in Ho Chi Minh City.

Although newly registered and additional capital fell, FDI disbursement in the first two months of this year increased. By February 20, the country disbursed US$1.2 billion, an increase of 7.1 percent compared to a year ago.

Optimistic future

Many said that FDI attraction in the whole year would not reach the target. However, Minister of Planning and Investment Bui Quang Vinh said that assessing FDI attraction needs to base on the whole process. Moreover, a fall in FDI attraction in the beginning months of the year is usual. For example, FDI inflow in Vietnam reached an estimated US$1.5 billion in the first two months of 2014, equal to 37.5 percent of 2013. In particular, following a series of incidents in industrial zones due to the unstable situation in the East Sea, Vietnam just attracted US$6.85 billion in the first half of 2014, a drop of 35.3 percent compared to the same period in 2013. However, in the second half of last year, thanks to effective solutions, FDI attraction plan was realized.

An optimistic future awaits in terms of FDI attraction. Firstly, Vietnam is strongly implementing institutional reform and improving the business and investment environment. The two amended enterprise and investment laws taking effect in July 2015 are expected to attract more foreign investors.

  Many major FDI projects are being prepared or are applying for an investment license. The situation of FDI will change after only several billion-dollar projects are given a license.

On February 14, the government issued Decree 15/2015/ND-CP on Public-Private Partnership (PPP) investments, helping the private sector involve in big projects. A decree will take effect on April 10 and is expected to attract more FDI capital for Vietnam.

Many major free trade agreements are expected to be signed in 2015 such as the Vietnam-Republic of Korea Free Trade Agreement (VKFTA) and the Vietnam and the Customs Union of Russia, Belarus and Kazakhstan Free Trade Agreement (VCUFTA). The Trans-Pacific Partnership (TPP) Agreement and the Regional Comprehensive Economic Partnership Agreement (RCEP) can conclude negotiations this year. These agreements will offer more opportunities for Vietnam to promote trade and attract more investment capital.

Vietnam’s key partners such as the Republic of Korea, Japan and the US have seen opportunities when pouring investment capital into Vietnam as they can make the most of preferential tariffs.

According to the Japan External Trade Organization (JETRO)’s 2014 report, about 62.3 percent of a number of Japanese companies operating in Vietnam were making good profits and more than 66 percent of them were planning to expand investment in the Vietnamese market. “These figures are higher than other countries in the region, showing that Vietnam remains an attractive destination in the eyes of Japanese investors,” JETRO in Ho Chi Minh City Managing Director Yasuzumi Hirotaka said.

US Ambassador to Vietnam Theodore Osius said that the US would like to become the leading investor in Vietnam. Meanwhile, Consulate General of the US in Ho Chi Minh City Economic Officer Nathan Lane said that foreign investment in Vietnam would strongly increase ahead of the signing of the TPP Agreement.

By Nguyen Phuong

 

 

Theo ven.vn