Trend or blip? FDI suddenly jumps

Vietnam’s newly registered and expanded foreign direct investment (FDI) capital in January reached $281.4 million, a 74 per cent rise from a year earlier. The disbursed FDI was $420 million, or a 5 per cent hike on-year, according to the Ministry of Planning and Investment’s Foreign Investment Agency (FIA). More than 72 per cent of FDI commitment was in the manufacturing sector.

The increases, both in term of commitment and disbursement, reflect a positive sign for FDI to Vietnam this year, after a significant decline in 2012.

According to FIA, the newly registered FDI projects in the first month of the year were valued at $257.1 million, up 293 per cent year-on-year. While the growth was drastic, analysts said the Vietnamese government should change policies to encourage more investments.

Hirokazu Yamaoka, head of Japan External Trade Organisation’s (Jetro) Hanoi office, said the Vietnamese government should act to meet expectations of foreign investors, citing the ability to enhance tax incentives and specific policies to attract multinational companies.

According to a Jetro survey late last year, approximately 66 per cent of Japanese firms operating in Vietnam said they wanted to continue expanding investments in this country in the next two years. However, Vietnam is losing its appeal compared to some other Asian nations.

Nguyen Mai, chairman of Vietnam Association of Foreign Invested Enterprises, said the surge of FDI would not be stable unless the Vietnamese government changed policies to make Vietnam more attractive than rivals like Cambodia and Myanmar. “The competition among Asian nations to lure FDI is becoming tougher as the global FDI inflows dropped in 2012,” said Mai.  

The United Nations Conference on Trade and Development on January 23 reported global FDI inflows last year fell 18 per cent to an estimated $1.3 trillion due to global macro-economic fragility and policy uncertainty for foreign investors. This year, the UN agency estimated global FDI may grow by around 7 to 8 per cent.

“When the global FDI is expected to take longer time to recover, countries will change policies to attract as much FDI as possible. Vietnam should do that immediately,” said Mai, adding that while labour-intensive manufacturing investments tended to move to Cambodia, Bangladesh and Myanmar, Vietnam should have appropriate policies to encourage FDI in hi-tech manufacturing industries.