Foreign Investment Sees Positive Signals

Vietnam attracted a record amount of foreign investment capital, a total US$5.2 billion, in the first five months of 2007, up 30 per cent on year. Growth over 30 per cent was also seen in pledged capital disbursement, export revenues and tax payments of foreign-invested companies. Especially, the capital flows from world economic powers like the US and Japan tended to rise.

 

Reasons for the record FDI capital include the opening of sensitive areas for foreign investors and the permission for foreign companies and economic groups set up commercial companies in Vietnam, which can import and export aquatic products, apparel and electronics parts.

 

Notably, many of the over 400 FDI projects licensed in the first half of this year are located in needy provinces like Thai Nguyen, Ha Giang, Cao Bang and Son La. In the first five months this year, an additional US$2.1 billion was injected into building factories and buying machines.

 

The current investment flow from the US to Vietnam is prompting a new investment wave. The clearest sign of this is the arrival of many US leading companies to seek business opportunities. The US-based “Crains New York Business” Magazine forecast that US investment flows into Vietnam may amount to US$8 billion this year, doubling the sum so far.

 

Unlike the prudent steps of US companies after the Vietnam-US Bilateral Trade Agreement became effective in 2001, US businesses are pushed their investment into Vietnam since late 2006 and especially after Vietnam’s accession to the WTO.

 

According to statistics released by the Foreign Investment Department under the Ministry of Planning and Investment, the US had 332 valid investment projects valued at US$2.3 billion as of the end of the first quarter 2007, including US$685.4 million disbursed, becoming the 8th largest foreign investor in Vietnam. US investment mainly focused on industry and construction, taking 64.8 per cent of capital value and services. The most common investment form is wholly foreign-owned. US projects are present in 33 of the 64 provinces and cities.

 

However, if US investment via third countries is included, the figure is higher. In fact, US leading companies like Coca-Cola, Procter & Gamble, Unocal and ConocoPhillips have invested into Vietnam via overseas branches. They have large sums of investment which is not officially counted as US investment capital. The Foreign Investment Department’s figure showed that US investors poured US$2.4 billion into 74 projects via third countries. Thus, if the two flows are combined, US businesses invested in 396 projects valued at over US$4.7 billion in Vietnam, ranking 6th out of 77 nations and territories investing in Vietnam.

 

In late April 2007, the largest-ever group of representatives from 18 leading US companies operating in the fields of IT, oil, gas, aviation and others, visited Vietnam to seek investment opportunities. They met the Vietnamese Prime Minister and high-ranking officials at the forum “Vietnam - a Bright Future for US Businesses.” Ms Frances A. Zwenig, High Commissioner of the US-ASEAN Trade Council said, “This delegation is joined by leading US companies and groups. Those already having projects in Vietnam will seek to expand operations, while others seek fresh business opportunities.”

 

Ms Zwenig said US companies reported high hopes after the recent successful US visit by

Vietnamese Deputy Prime Minister Pham Gia Khiem, because the two nations have signed an agreement related to intellectual property. Then, Microsoft CEO Steve Ballmer visited Vietnam in May to sign technology transfer agreements valued at nearly US$30 million with Vietnamese partners. This is initial proof of US trust in intellectual property protection in Vietnam.

US companies also especially expect the June visit by Vietnamese President Nguyen Minh Triet will generate many commercial contracts.

 

To draw more FDI capital from the US, Phan Huu Thang, Director of the Foreign Investment Department said, “Vietnam should collect information about the investment demand of US companies, to take the initiative in introducing projects to them. Given the Intel project as an example, when learning that they want to choose an Asian country like India, Thailand and Indonesia to build a factory, Vietnam pre-emptively invites them to Vietnam. In the long term, it is also necessary to send investment promotion delegations to the US.”