Vietnam unfazed by FDI plunge

A woman welds a table at a furniture factory outside Hanoi, Vietnam - Photo by Reuters

The Foreign Investment Agency under the Ministry of Planning and Investment reported that at US$9.9 billion, FDI in the first five months was just 81.6 percent of the corresponding figure in 2017.

The US$9.9 billion includes US$4.66 billion in new investments, US$2.49 billion in additional capital and US$2.75 billion from other forms of capital contributions including share purchases by foreign investors, the agency reported on its website.

The report also said that as of April 20, foreign investors’ year-on-year disbursement rate increased 6.3 percent for a total value of US$5.1 billion.

The Dau Tu newspaper quoted an unnamed FIA representative as saying there was no cause for alarm and that the FDI inflow would be back on track when new projects are approved in the coming quarters of the year.

The agency was focusing more on quality projects and those that meet specific needs of different regions in the country, the representative added.

Nguyen Mai, Head of Vietnam Association of Foreign Investment Enterprises (VAFIE), expressed a similar view, saying the drop should only be used for reference purposes and does not fully reflect the bigger picture.

“Foreign investors have already spent lots of money in fresh FDI, so it would take some time for these companies to get returns on their investment and invest in newer projects,” Mai said.

“So the drop does not fully present the bigger picture and should be used for reference only,” he reiterated.

Mai also said that a market report prepared by the American Chamber of Commerce, AmCham, clearly stated that Vietnam still has high potential for growth and will continue to attract more foreign investors in the future.

In its forecast for 2018, AmCham had said that Vietnam continues to be a haven for overseas investors in electronics and polyester yarn factories due to "low costs, abundance of labor and matter-of-fact permitting process."

In the past few months, Vietnamese leaders have met with big companies from Korea, Singapore, and Japan to encourage them to continue investing in the country.

During his last visit to Vietnam at the end of March 2018, South Korean leader Moon Jae-in also emphasized that Vietnam will be a priority economic partner of his country’s southern region.

In 2017, Vietnam's total FDI was around US$36 billion with the manufacturing, distribution and real estate industries attracting a lot of overseas investors. A record high disbursement rate of US$17.5 billion was also seen.

Also last year, Japan surpassed South Korea to become Vietnam’s top FDI partner.