Foreign Investment with a Basic Change

In 2006, foreign direct investment in Vietnam continued its high growth in volume, and also changed in quality. Statistics of the Ministry of Planning and Investment show that in 2006, both registered capital and realised capital reached record highs since the Law on Foreign Investment was launched in Vietnam in 1987. In 2006, Vietnam attracted US$10.2 billion in foreign investment, up by 49.1 per cent against the previous year.

 

Vietnam’s foreign investment attraction in 2006 featured large projects developed by trans-national groups, such as a US$1.126 billion project of the Posco Steel Company, a US$1 billion project of Intel Products Vietnam, a US$556 million project of Tycoons Worldwide Steel (Vietnam), a US$314 million project of T.H.T Development Company, and two US$300 million projects of Winvest Investment (Vietnam) and Meiko. Ten big projects licensed in 2006 alone were capitalised at US$4 billion. This demonstrates the largest ever scale of foreign-invested projects, in 2006.

 

In terms of investment structure, in 2006, the number of hi-tech projects saw a significant increase. This matches the investment attraction orientations of the Vietnamese Party and State in the coming year.

 

In term of geographic locations of countries and territories investing in Vietnam, there was a change for the better in 2006. The Republic of Korea was the leader in 2006 with a total investment capital of US$2.5 billion. It was followed by the US with a total US$1.7 billion (the figure included projects developed by the US via third countries). This could be considered as the beginning of a period with sharp increases in US investment in Vietnam. Japan continued to rank third in registered capital, but ranked on top in terms of realised capital.

 

In 2006, realised foreign investment capital was around US$4.1 billion, up by 24.2 per cent against 2005. This was the highest figure for realised capital since Vietnam issued the Law on Foreign Investment in 1987. Of this figure, around US$3.6 billion came from foreign countries. Many large projects have been implemented rapidly, such as the plants of Hoya Glass Disle, Canon, Matsushita, Brothers Industries and Honda, as well as a project on building the Kwang Myung clinic in Hanoi, a CDMA phone manufacturing project, and Intel project…

 

The foreign-invested sector continued to see high growth rates in production and business activities. In 2006, the sector earned around US$29.4 billion in revenues, up by 31.3 per cent against 2005. Of this figure, non-oil export revenues were estimated at US$14.6 billion, up by 31.2 per cent (the figure reached US$22.6 billion, if crude oil export revenues are included), accounting for more than 57 per cent of the whole country’s export value.

 

In 2006, industrial production of the foreign-invested sector increased by 19.5 per cent, higher than the national average. Production value of enterprises in industrial parks and export processing zones was estimated at US$14 billion, up by 25 per cent against 2005. Import turnover of foreign-invested enterprises was put at US$16.35 billion, up by 19.3 per cent.

The sector in 2006 contributed US$1.26 billion to the State budget, up by 17.3 per cent against 2005, and generated jobs for 1.12 million people, let alone tens of millions of indirect workers.

 

Foreign investment gained exceptional results in 2006, continuing to affirm its important role in the Vietnamese economy. These results can only increase momentum for foreign investment activities in 2007.

 

With the results of 2006, alongside favourable conditions and new opportunities from the US’s granting of permanent normal trade relations for Vietnam and efforts by the Vietnamese Government to improve local business and investment environment, in 2007 foreign investment attraction will continue to grow with more projects from major partners, such as the US and Japan, as well as traditional partners such as the Republic of Korea, Taiwan and Singapore. It is possible to forecast that foreign investment in 2007 will reach more than US$10 billion.

 

While Vietnam is striving to attract more foreign investment, the number of Vietnamese enterprises investing in foreign countries has increased. What do you think about this tendency?
In 2006, Vietnamese enterprises’ investment in foreign countries continued to develop, with a better legal corridor for these activities from the 2005 Investment Law taking effect July 1, 2006, which encourages Vietnamese enterprises’ investment in foreign countries. Also, the Government issued Decree N⁰ 78/2006/ND-CP dated August 9, 2006, replacing Decree N⁰ 22/1999/ND-CP dated April 14, 1999, to stipulate the activity. Under the decree, procedures for Vietnamese enterprises’ investment in foreign countries have been greatly simplified. At the same time, Vietnam’s accession to the World Trade Organisation (WTO) will also facilitate Vietnamese enterprises’ investment and trade activities in foreign countries.

 

The increased number of Vietnamese enterprises investing in foreign countries proves the on-going growth of the Vietnamese economy, with a more perfect legal environment and more Vietnamese enterprises financially capable of expanding their markets, thus reducing production and transportation costs and exploiting the advantages of international integration.   

To encourage further Vietnamese investment in foreign countries, the Ministry of Planning and Investment is building supporting mechanisms under the guidelines of the Prime Minister.