FDI Capital from ASEAN to Vietnam: Bouncing Back

 

Although ASEAN countries began investing in Vietnam later than many others, they have made great advances. From several exploratory projects by Singapore, Thailand and Indonesia in the early 1990s, capital flow strengthened in 1995 with a total of 230 projects in Vietnam with more than US$3 billion registered capital. After Vietnam joined the ASEAN Free Trade Area (AFTA) in January 1996, FDI attraction exceeded US$7.8 billion in mid-1997.

 

Investment capital from the ASEAN bloc at that time accounted for some 30 per cent of total FDI capital in Vietnam. Singapore, Malaysia and Thailand respectively took first, seventh and eighth place among foreign investors in Vietnam.

 

However, the Asian financial crisis in 1997 caused a sharp drop in this capital flow. There were very few newly licensed projects while valid projects moved at snail’s space. Only Singapore still kept the growth pace.

 

FDI capital flow from ASEAN countries into Vietnam has recovered from late 2000 to date, after their economies recovered.

 

According to the Foreign Investment Agency under the Ministry of Planning and Investment of Vietnam, as of May 2007, ASEAN countries injected more than US$16 billion into 1,179 projects in Vietnam.

 

Singapore took the lead in the ASEAN block with 474 valid projects valued at US$9.07 billion and kept second place among the total 78 countries and territories investing in Vietnam. Malaysia was the second largest investor in the ASEAN bloc and the 10^th largest global investor with US$1.7 billion in 219 projects. The capital size of investment projects in Vietnam from the ASEAN region is higher than the average FDI project size in the country.

 

At present, most FDI projects from ASEAN countries in Vietnam focus on transportation, post, hotel, tourism, finance, banking, culture and education. Most projects with major investment capital, advanced technologies, and oil, gas, telecom, electronics and IT projects come from Europe and Japan.

 

In the context of soaring FDI capital flows into Vietnam and the celebration of the 40^th ASEAN founding anniversary (August 8, 2007), Vietnam has sought measures to enlarge and push capital flows from these countries by promoting its geographic advantages and relations in the region.

Accordingly, the Foreign Investment Agency pointed out that the implementation of licensed projects together with the attraction of new projects should be one of the top measures. The Vietnamese Prime Minister has instructed competent agencies to check and categorise projects from Singapore, the largest investor in the ASEAN bloc, to provide concrete assistance to investors to carry out the projects as pledged. Currently, about US$5 billion worth of licensed projects from this country remain inactive.

 

It is also necessary to organise investment promotion activities for specific sectors, especially in countries with many projects. At the same time, Vietnam should call foreign investors to set up industrial parks, like the Vietnam-Singapore Industrial Park (VSIP).

Regarding investment partners, the Ministry of Planning and Investment advocates calling investment capital from giant firms, which have already invested in ASEAN countries, to put Vietnam into their production systems. (VNA)