09:01 | 18/01/2018 Investment
(VEN) - Foreign direct investment (FDI) in Vietnam saw a record high, far exceeding expectations and forecasts of economists at home and abroad. Nguyen Mai, chairman of the Vietnam Association of Foreign-Invested Enterprises, said FDI attraction in 2018 could be higher than in 2017.
Greater investor trust
2017 was a successful year for Vietnam in attracting FDI. Do Nhat Hoang, general director of the Foreign Investment Agency under the Ministry of Planning and Investment, said Vietnam attracted nearly US$36 billion in FDI in 2017. FDI disbursement in 2017 also set a record, increasing to US$17.5 billion, reflecting improvement in the Vietnamese business environment and greater investor trust, as a result.
Vietnam is considered an attractive destination in the eyes of foreign investors thanks to its political stability, improved business and investment environment, young population and abundant labor force.
Do Nhat Hoang said Vietnam is seen as one of the very few countries in the world that enjoys political stability, an important factor in promoting foreign investment.
A large population of more than 95 million people, with those of working age accounting for more than 60 percent of the population, have made Vietnam attractive in the eyes of foreign investors. In addition, labor costs in Vietnam are cheaper than in many countries in the region and the world.
Support industry far behind
Vietnam’s efforts in improving the business and investment environment in 2017 were recognized by international organizations.
With strengthened access to credit and improvement in tax reforms, Vietnam moved up 14 places to rank 68th among 190 countries in the 15th edition of the World Bank’s Doing Business 2018 report. The World Economic Forum’s latest global competitiveness list ranked Vietnam 55th overall, up 20 places from five years ago. Moody’s Investors Service has changed its outlook for Vietnam’s banking system for the next 12-18 months, shifting it from stable to positive.
According to the World Bank’s 2035 report, about 10 percent of Vietnam’s population are middle-class, and the percentage is expected to rise to 50 by 2035. This will increase economic demand, creating more and better jobs and also enabling Vietnam to gradually join supply chains and production networks in the APEC region and in the world. Vietnam has been promoting international economic integration, reflected in the signing of a series of bilateral and multilateral free trade agreements. The country is making greater efforts to speed up the signing of the EU-Vietnam Free Trade Agreement, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), and the Regional Comprehensive Economic Partnership (RCEP).
With improved business and investment environment, FDI in Vietnam is forecast to increase in 2018 with great attention to the manufacturing and processing sector, services, real estate and agriculture, according to Do Nhat Hoang.
Despite these positive results, the Vietnamese business environment remains limited. Business costs are higher than in many countries in the region and the world, while support industries have not yet developed.
Nguyen Manh Linh, deputy director of the Supporting Industry Enterprise Development Center (SIDEC), said only 300 Vietnamese companies have fully met the criteria of foreign businesses on support industries. This figure is very small compared to the demand of FDI businesses in Vietnam.
Phan Huu Thang, former general director of the Foreign Investment Agency, said that although Vietnam has adopted many mechanisms and policies to develop support industries, it has not met potential.
To create a breakthrough in FDI attraction in 2018 and in the coming years, Vietnam should make further efforts to improve the business and investment environment. In addition, it must adopt a specific strategy in the development of support industries to attract large and high-quality FDI projects, which have great influence on the country’s socioeconomic development.