Rise in disbursed FDI mirrors investors’ growing confidence

Last week, the Ministry of Planning and Investment’s Foreign Investment Agency reported that the newly-registered and expanded foreign direct investment (FDI) in this year’s first seven months hit $8.8 billion, down 7.6 per cent year-on-year. The total figure included $6.9 billion in newly-registered businesses, and $1.88 billion in expanded investments.

The three biggest FDI attractors were the processing and manufacturing ($6.14 billion), property ($1.7 billion), and construction ($194 million).

However, the seven-month disbursed FDI was estimated to be $7.4 billion, up 9.6 per cent year-on-year.

Prominent economist Nguyen Mai told VIR that Vietnam’s FDI bill of health was quite good, with FDI playing a crucial role in supporting the country’s economy.

“We shouldn’t be too worried about the decrease in newly-registered or expanded FDI, because disbursed FDI is the most important. If an investor registers $100 million for his project but he fails to implement the project, the registered $100 million is meaningless. Therefore, a rise of nearly 10 per cent in seven-month FDI disbursement is very good, especially amid local enterprises’ poor performance,” he said.

As of late July 2015, tghe total registered FDI in Vietnam was about $250 billion, of which $130 billion has been disbursed.

“I think it may take ten more years for the undisbursed $120 billion to be disbursed,” Mai said.

The Vietnamese economy witnessed a trade deficit of $3.96 billion in this year’s first seven months, equivalent to 4.75 per cent of the total export turnover.

“Without FDI, the trade deficit may soar to more than $20 billion. This will seriously affect the country’s balance of payments and macro-economic monitoring,” Mai said.

FDI accounted for 24 per cent of Vietnam’s total investment in this year’s first seven months, up 10 per cent year-on-year, and higher than the 22 per cent recorded last year.

Mai further highlighted the importance of FDI by saying that it had developed Vietnam from an exporter of farm produce to that of high-quality textiles, garments and footwear, and – most notably – electronics products, through the participation of giants such as LG, Samsung, Intel, Microsoft, and Formosa.

“During Prime Minister Nguyen Tan Dung’s official visit to Thailand on July 23, the two nations signed three colossal projects worth about $30 billion including the oil refinery in Binh Dinh province’s Nhon Hoi Economic Zone, an oil refinery in Ba Ria-Vung Tau province, and a 2,400 megawatt thermal power project,” Mai revealed.

The Foreign Investment Agency’s director Do Nhat Hoang also said foreign investors were showing great confidence in Vietnam. “It is expected that disbursed FDI will continue increasing until the year’s end.”

“Vietnam has enacted two new laws on Investment and Enterprises and is strongly reforming its business and investment climate by simplifying administrative procedures, and reducing operational costs for investors. Additionally, Vietnam has low investment costs within ASEAN,” he said.

According to Japan’s External Trade Organisation, Vietnam has a minimum monthly salary of only $123, far lower than many nations in Southeast Asia. Additionally, Vietnam’s electricity cost stands at 0.4 US cent, almost the lowest level within ASEAN.

“Previously, it would take 30-45 days for a project to be licensed. Now, the time is only 15 days,” Hoang said.