According to statistics from the Foreign Investment Agency under the Ministry of Planning and Investment, as of September 20, 2012, there were 775 new projects licensed to invest in Vietnam with the total registered capital of US$6.1 billion, equivalent to 82.6 percent of last year’s figure. During the same period, 314 projects registered to increase their investment capital amounting to US$3.4 billion, up 7.2 percent compared to the same period in 2011. In all, foreign investors have so far this year invested US$9.52 billion in Vietnam, equivalent to 72.1 percent of the same period in 2011. Thus, most of the Foreign Direct Investment (FDI) figures were lower than those in the same period last year.
Conforming to the Ministry of Planning and Investment’s guidelines to focus on the quality and the capital disbursement rate to investment projects instead of the total dollar amounts of registered capital, in the first nine months of 2012, the capital disbursement to FDI projects equalled US$8.1 billion, equivalent to 98.8 percent compared to the same period in 2011. This is a remarkable effort on the foreign investors’ part given the lacklustre global economic picture and the reduction in sizes and even bankruptcy declaration that many businesses are facing. This pessimistic reality runs contrast to the total dollar amounts of invested capital as well as the will of the investment community to invest in Vietnam at this time in order to enjoy the recovery of the Vietnam’s economy in the near future.
There are currently 52 different countries investing in Vietnam, in which Japan is the leading investor with US$4.68 billion in total invested capital, 203 new projects and 82 projects with supplemental capital; representing 49.1 percent the total FDI. The survey’s result shows that Vietnam is receiving considerable attention from Japanese businesses and in the near future there will be a wave of small and medium size Japanese companies seeking investment opportunities in Vietnam. After Japan, Samoa is the first runner-up with total registered of new and supplemental invested capital of US$889.8 million, representing 9.3 percent of total FDI. Korea is the second runner-up with total registered of new and supplemental invested capital of US$711.2 million, representing 7.5 percent of total FDI. British Virgin Island takes the fourth place with total registered of new and supplemental invested capital of US$611.2 million, representing 6.4 percent of total FDI. Singapore ranks fifth with total registered of new and supplemental invested capital of US$588.4 million, representing 6.2 percent of total FDI.
Regarding the industry wise investment ratio, processing and manufacturing industries were the leaders in attracting FDI with 381 new registered projects and the total new and supplemental registered capital of US$6.24 billion, representing 65.5 percent of the registered FDI in first nine months. Most noticeably, real estate with a total registered capital of more than US$1.8 billion in eight projects, up US$80 million compared to August 2012, took the second position in total new and supplemental registered capital in the first nine months of 2012. This helps improve investors’ confidence in the recovery of the Vietnam’s real estate market and evident in the attraction of the market to foreign investors. Behind processing, manufacturing and real estate was the retail and maintenance industry with 139 newly registered projects and the total new and supplemental registered capital of US$406.2 million, representing 4.3 percent of the total FDI. The fourth place belonged to information and communication industry with total new and supplemental registered capital of US$402.3 million.
Binh Duong still retained the first position in attracting FDI with US$2.16 billion, 74 newly registered projects and 53 projects with supplemental capital, representing 22.7 percent of total FDI. Hai Phong took the second place with total new and supplemental capital of US$1.06 billion, representing 11.3 percent of total FDI, followed by Dong Nai with US$991.6 million. Ho Chi Minh City, Hanoi, Bac Giang took the subsequent positions with respective total registered capital of US$996 million, US$954 million and US$921 million.
The majority of FDI projects in the first nine months of 2012 were small and medium in scale, with capital being channelled mostly to processing, manufacturing and real estate industries. Out of the 775 newly registered projects in the first nine months, only one project boasted a US$1 billion invested capital in the real estate industry; 64 projects with total invested capital of more than US$10 million each (representing 8.5 percent of the total number of registered projects) with the accumulated invested capital of US$5.29 billion. There were 145 projects of small and extremely small scale with total invested capital of US$100,000 each (representing 18.7 percent the total number of projects).
In 2012, Vietnam set the target to attract US$15-17 billion in total FDI. However, according to the statistics of the first nine months, the Ministry of Planning and Investment claims that it will be difficult to achieve the set target, especially when the global FDI flow is slowing down. Apart from external and objective factors, many experts and foreign investors have pointed out numerous subjective internal factors that affect investment into Vietnam, such as complicated investment procedures, the mismatch in monitoring foreign investment between the central and local authorities etc. This reality necessitates bolder reforms from Vietnam’s part in order to adjust the fundamental investment promoting mechanism towards appropriating manpower according to specialisation, industries, sectors and provinces to best utilise the strength and potential and reduce the crowd behaviour in investment. Furthermore, responsible government agencies should focus on scrutinising, modifying and supplementing regulations regarding the responsibility in monitoring foreign investment so that not only the local authority has their fair share of responsibility but central ministries and departments play a more important role in inspecting, regulating and monitoring foreign investment. At the same time, projects using advance technologies should be encouraged so that highly competitive products are produced and exported in order to create a wide-spreading effect, contributing to a shift in the economic mechanism of local provinces.
Viet Dong
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