FDI expected to pick up in 2017

15:08 | 08/02/2017 Investment

(VEN) - Foreign direct investment (FDI) in Vietnam fell short of its target last year, but positive signals for FDI inflows have been emerging since the beginning of 2017.

Lack of major projects

According to the Ministry of Planning and Investment’s Foreign Investment Agency, Vietnam had 2,556 new FDI projects in 2016 with total registered capital of US$15.18 billion. In addition, as many as 1,225 existing projects increased their capital investment by more than US$5.76 billion.

As a result, total newly registered and additional capital in 2016 reached US$20.94 billion, lower than the US$22.75 billion in 2015 and the US$22-23 billion target set by the Ministry of Planning and Investment.

While the number of new FDI projects increased sharply by 27 percent compared to 2015, total newly registered and additional capital dropped because most of the 2016 projects were small, except for LG’s more than US$1 billion investment in Hai Phong City. In 2015, in comparison, five major projects with total capital of about US$6.6 billion were logged.

In addition to total newly registered and additional capital, there were 2,547 enterprises and economic entities that enjoyed foreign capital through the purchase of more than US$3.4 billion in shares. The sum total of registered capital from new projects, additional funding and investment in the form of capital contribution and share purchasing in 2016 reached around US$24.4 billion. Nguyen Bich Lam, the general director of the Ministry of Planning and Investment’s General Statistics Office, said that the added investment in the form of capital contribution and share purchasing was an innovation in the national statistics system.

Power plants

According to the Ministry of Planning and Investment, FDI fell short of its 2016 target because the Nghi Son 2 and the Vung Ang 2 power plant projects were initially expected to be licensed last year but have been delayed to 2017.

The Vung Ang 2 Thermal Power Build-Operate-Transfer (BOT) agreement finalized between the Ministry of Industry and Trade’s General Directorate of Energy and the Vung Ang 2 Thermal Power Joint Stock Company, was handed over to the Japanese BOT investor Mitsubishi on the occasion of Japanese Prime Minister Abe’s visit to Vietnam. According to estimates, Vietnam will attract nearly US$5 billion in FDI if the two projects are licensed.

Samsung Display Vietnam plans to pour more US$2.5 billion into Bac Ninh Province, bringing its total investment capital to US$6.5 billion. It has also proposed expanding investment in its current project in Bac Ninh Province. Provincial authorities presented the prime minister with a proposal to approve investment incentives for the expansion of this project in accordance with the incentive criteria for large-scale projects. If this proposal is approved, Vietnam will have an additional billion-dollar project in 2017.

FDI disbursement increased sharply in 2016 and hit a record, disbursing US$15.8 billion, an increase of nine percent compared to 2015. Vietnam Economic Association General Secretary Nguyen Quang Thai said this strong increase reflects the high expectations of foreign investors for the Vietnamese investment climate.

In addition to these positive signals, the process of Vietnam’s international economic integration through bilateral and multilateral free trade agreements, plus the efforts of the government in improving the investment environment in recent years, are attracting foreign investors. However, to ensure the sustainability and effectiveness of FDI attraction, Vietnam needs to carefully select projects in order to maximize their spillover effects on the economy.

General Statistics Office Director Nguyen Bich Lam:

Investment in the form of capital contribution and share purchasing is forecast to continue its strong increase in 2017.

Chu Dan