Vietnam’s Overseas Investment Picture: Not All Bright Colors

10:57:08 AM | 23/5/2019

Data from the General Statistics Office (GSO) under the Ministry of Planning and Investment (MPI) showed that Vietnam’s overseas investment totaled US$149.5 million in 23 countries and territories in the first four months of 2019.

Bitterness from big projects

In general, Vietnam’s overseas investment is quite good. By sector, investment for science and technology reached US$81.8 million, accounting for 54.7% of the total, followed by finance, banking and insurance sector with US$36.1 million or 24.1% of the total; wholesaling, retailing and repairing of automobiles, motorcycles and other motor vehicles amounting at US$16.5 million or 11%, and accommodation and catering services at US$7 million or 4.7%. Vietnam’s investment reached 23 countries and territories in the reported period. Spain was the biggest recipient of Vietnamese investment with US$59.8 million, accounting for 40% of the total, followed by Cambodia with US$37.9 million, or 25.4%; Malaysia with US$13.9 million or 9.3%; and the United States with US$12.6 million, or 8.4%.

Nevertheless, in detail, the picture of Vietnamese overseas investment is not all bright. A report by the Ministry of Industry and Trade in coordination with the Commission for the Management of State Capital at Enterprises revealed performances of overseas projects invested by the Vietnam National Oil and Gas Group (PetroVietnam). 11 out of 13 projects - mostly invested in the 2009 - 2012 period - were operating at a loss or faced a risk of loss. For example, Junin 2 project in Venezuela is invested by PetroVietnam Exploration and Production Corporation (PVEP) with 40% of stake and Venezuela Oil and Gas Corporation. The project costs more than US$1.8 billion for the first phase from 2010 to 2015, including more than US$500 million of bonus for the project. To date, PVEP has injected more than US$400 million into the project. However, the project was halted under the Prime Minister’s direction stated at the Notice of the Government Office on December 2, 2013. No oil has been tapped from this project, despite huge investment spending.

PetroVietnam is not the only noticeable case. Vietnam National Chemical Group (Vinachem) has also poured a lot into the VND10-trillion potassium production and processing project in Laos. But according to the conclusion of the Inspectorate of the Ministry of Industry and Trade, the project has been suspended and faced a complete shutdown.

Dependence on IT projects

While the big picture of overseas investment by Vietnamese State-owned enterprises (SOEs) is not very bright, this outcome is completely different from private businesses, whose every dollar spent results in a big source of income for the country.

Service is a favorite option for Vietnamese companies when they make overseas investment. Their investment is various in sectors, including communication, health, education and training, finance and banking, real estate, warehousing, transportation, entertainment and art.

Mr. Hoang Nam Tien, President of FPT Software, said, digital transformation is considered a key direction for FPT Group to promote offshore investment in the last three years. At present, FPT Software has provided services to more than 200 businesses worldwide. And, in 2018, its overseas service revenue was VND1,679 billion, representing a year on year growth of 31% and accounting for 20% of total software export value.

During 20 years of development, FPT Software has made significant investments for basic technology research and development. Six years ago, the company invested in mobile technology, data analysis and cloud computing. After that, it invested in big data analysis and internet of things (IoT) and now artificial intelligence (AI). At present, its investment has come to fruition, with revenue of nearly US$400 million, 16,000 employees and 100 customers in the list of Top 500 companies in the world. The clearest proof for the success of FPT Software’s IT projects is the company has become a reliable partner of leading technology corporations in the world such as Amazon, Siemens, General Electric and IBM.

Remarking on Vietnam's offshore investment, Mr. Dau Anh Tuan, Director of Legal Department, the Vietnam Chamber of Commerce and Industry (VCCI), said that, in the past 30 years, Vietnamese enterprises have actively expanded their markets and sought for new ones to increase profits. However, their choices face potential risks. Therefore, they need to think twice before making decisions, to avoid being caught in ineffective projects as PetroVietnam and Vinachem.

Meanwhile, Dr. Nguyen Duc Thanh, Director of the Vietnam Institute of Economic and Policy Research (VEPR), said that overseas investment failures of State-owned enterprises are partly attributed to the responsibility of the highest decision-making bodies because most of them are considered at national strategic importance. Vietnam loses on foreign markets because it has not thoroughly studied the market rules, imposed subjective will in decision making and lacked strategic visions. As a result, above-mentioned projects need to be reassessed and invested on a long-term practical vision, respect market principles and international business practices and place eventual outcomes above all, he stressed.

Anh Phuong