FDI Fluctuations

The total registered capital since the beginning of the year has reached just some US$7.63 billion, down 27.8 percent against the same period last year. The number of newly registered projects is 504, similar to that of new projects, down 33.9 percent from last year. Furthermore, July sees 15 more projects registering for an additional capital amount of US$148 million. Economic experts state that despite positive changes compared to earlier months, the level of attracted FDI is still far behind that of last year. The positive trend is only expressed in the disbursement rate in July, which hit US$1billion. The disbursement rate of FDI in the first seven months this year has reached US$6.3 billion, 1.6 percent lower than the previous year.

 

According to the Foreign Investment Agency, total registered capital in the first half of this year is US$6.66 billion, equivalent to 72.9 percent of the same period last year and only 30 percent of total estimated capital. If the growth rate continues this way, this will be the first time Vietnam has ever witnessed a drop in the flow of this important type of capital since 2008.

 

According to Mr Do Nhat Hoang, Head of Foreign Investment Agency, US$10 billion of FDI will be disbursed as planned for the year. However, the situation will be much brighter if macroeconomic stability brings investors a feeling of security and they return to Vietnam.

 

The recent decrease in FDI should be viewed from a positive stance and should not be blamed on relevant authorities’ weak capability to attract FDI. It is obvious that in order to evaluate FDI attraction, it is necessary to consider this capital flow as a long-term financial investment activity with capital amounting to tens of millions of US dollars and even billions of US dollars. Besides, it takes 2-3 years for an FDI project to make profit after being licensed and officially starting business. For some large projects, it could take even more time. Therefore, although Vietnam is witnessing a dramatic decrease in FDI attraction, prospects are still bright if considered as a longer term process.

 

Some economic experts suggest we should view and access this capital flow with a new approach to avoid being shocked when seeing decreases. The Government and local authorities should have new strategies to attract FDI in order to create higher added value.

 

Currently, many international investors pay special attention to finding a skilled and high quality labour force. At the same time, living conditions in industrial parks and processing zones need to be improved. Macroeconomic stability is also of utmost importance for enterprises to feel secure when investing. Identification of investor list needs to be studied so that economic benefits can be maximized once a specific project is decided.