Seven-month FDI attraction: Good growth but big differentiation

Vietnam attracted US$12.94 billion of FDI in the first seven months of 2016

Since the beginning of this year, foreign investors have invested in Vietnam through 1,408 new projects with total registered capital of US$8.69 billion, a rise of 25.5 percent compared with the same period last year. Meanwhile, 660 ongoing projects were registered to increase their capital by a total of US$4.24 billion, an increase of 125.7 percent compared with the same period last year.

FDI in Vietnam in the first seven months came from 65 countries and territories with the Republic of Korea, Singapore, and Japan standing at the top three positions. Vietnam and these Asian countries share cultural similarities and have for a long time promoted cooperation in various fields.

FDI disbursement in the first seven months reached US$8.55 billion, a rise of 15.5 percent compared with the same period last year. According to leaders of the Foreign Investment Agency under the MPI, these encouraging results of FDI attraction and disbursement in the first seven months showed that the Vietnamese investment environment has improved thanks to government policies and efforts by ministries and sectors. However, Nguyen Bich Lam, Director General of the General Statistics Office, forecasted FDI attraction in 2016 could hardly exceed 2015’s result, US$23 billion.

The city of Hai Phong took the lead among localities nationwide in attracting FDI, with 28 new projects attracted and 21 ongoing projects increasing their capital. The city attracted US$1.98 billion in the first seven months, accounting for 15.3 percent of total FDI in Vietnam. Hanoi ranked second with US$1.68 billion, accounting for 13 percent of the total. Dong Nai ranked third with US$1.45 billion, accounting for 11.2 percent of the total.

FDI in Vietnam in the first seven months covered 19 areas, concentrating in processing and manufacturing industries (these sectors attracted US$9.12 billion through 598 new projects and 485 ongoing projects increasing their capital, accounting for 70.5 percent of total FDI in Vietnam).

However, FDI attraction in the first seven months showed a big gap between different sectors and localities. The paradox was that processing and manufacturing industries attracted a majority of FDI thanks to abundant and relatively low-cost labor although these sectors create little added value for the economy due to high proportion of offshore outsourcing, while advantaged sectors like agriculture, forestry and fisheries attracted just less than one percent of total FDI in the country.

FDI was concentrated mostly in cities and provinces with adequate infrastructure such as Hanoi, Bac Ninh, Hai Phong, Dong Nai, and Ho Chi Minh City, while localities in difficult socioeconomic conditions such as Lang Son, Yen Bai, Ben Tre, Dak Lak, and Gia Lai could not attract new projects and even saw ongoing projects decreasing their capital. Therefore, a major task for the coming time is to narrow the gap in FDI attraction among different sectors and localities. 

Nguyen Hoa