In the first 7 months of 2012, Vietnam attracted $8.03 billion of foreign direct investment (FDI), in which, investment in industry accounted for nearly 70 percent of total registered capital, but most projects were small-scale.
This situation makes many people wonder that whether Vietnam’s industry is attractive enough for big projects. But Phan Huu Thang, director of Research Centre for Foreign Investment, asserted that industry in Vietnam is still attractive and in the future there will be billion-dollar projects invested in this sector.
In recent years, registered FDI in Vietnam has continued to decline. What is the reason?
Although FDI inflows into Vietnam in general are declining, implemented capital remains stable at an average of about $11 billion a year, but it can no longer maintain the growth rate like the previous stage.
There are a number of causes for this, including business environment, poor infrastructure, lack of skilled human resources, limited administrative procedures and land clearance for FDI projects, and that the management of licensed FDI projects has not met the investment requirements, all of which lead to low FDI attraction and disbursement.
In addition, the past general economic instability, indicated by high inflation, high interest rates and a number of domestic enterprises facing difficulties, have also made the investment environment less attractive. Besides, the unstable situation of the world economy and the difficulty of a large number of partners in Vietnam’s FDI such as Japan have a direct effect on Vietnam’s FDI attraction.
What is your review on Vietnam’s FDI attraction in the first 7 months of 2012? Is the goal of attracting about $15-17 billion likely to be realised?
In the first 7 months, realised FDI reached $6.35 billion, which is about 99.2 percent of the same period last year. The newly and additional registered capital reached $8.03 billion, up by 66.9 percent over the same period.
It showed that the aim to attract $15-17 billion in FDI in 2012 is too high to reach. There are now only 5 months to the end of 2012, and there has been no information on large scale projects in the process of evaluation or negotiation.
According to the report by the Foreign Investment Agency, the first 7 months of 2012 housed only 1 FDI project with capital over $1 billion and it was in the real estate sector. Projects investing in industry often have very low capital. So is industry in Vietnam incapable of large FDI projects?
In the first 7 months of 2012 the total registered FDI in processing and manufacturing still accounts for almost 70 percent of the total registered capital. However, these projects are in small scale. But it does not mean that Vietnam’s industry is incapable of attracting large-scale FDI projects.
In previous years, we licensed many large scale projects in steel, petrochemical, telecommunications, electronics and mechanics, and in the future, with a new investment promotion orientation, the country will certainly have large scale industrial projects and a high concentration of industry in Vietnam.
In your opinion, to attract large FDI projects in the industrial sector, what do we need to do now?
To attract large-scale FDI projects in the industrial sector, first we need to have large scale industries to attract foreign investment. These projects must first be included in Vietnam’s industry development plans to 2020, and designed comprehensively to attract FDI from outside.
Also, investment promotion should be prepared in accordance with international practice, which has clearly defined forms of investment, location, land and other conditions of associated infrastructure and investment incentives, then the specific investment promotion approach to invite potential investors.
And another important thing is the support of large FDI enterprises currently operating in Vietnam which will also have impact on the attraction of large-scale industrial projects in Vietnam in the near future.