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New Investment Wave Flowing into Vietnam
01 | 10 | 2007
Many experts said that one of Vietnam’s outstanding achievements after eight months of WTO membership is the record in foreign investment. The Foreign Investment Department has forecast Vietnam will be able to attract US$13 billion of foreign investment this year, up from the target of US$12 billion. US$8.3 billion in Jan-August
According to the Department of Foreign Investment under the Ministry of Planning and Investment, as many as 814 new projects have been licensed in the first eight months of this year, with total pledged capital of up to US$7 billion. This is the record in investment capital so far.

In the period, 247 existing projects have registered to raise total capital to US$1.3 billion. In total, FDI into Vietnam reached US$8.3 billion in the January-August period, up nearly 40 per cent on year.

As calculated, a project had an average capital of US$9.8 million, higher than US$7 million in 2006. The investment in big projects was in discussion in the first quarter of 2007, with total capital of US$20 billion. The figure increased to US$35 billion in the mid-year and US$51 billion with 47 projects in the first eight months.

In the investment category, Foxconn is leading with the project to build some technology zones in Bac Ninh and Bac Giang provinces to produce hi-tech products in electronic sector, with a record capital of US$5 billion. The group has started work on two first plants in the project.

Ranking the second is Naphtha Cracking Petrochemical Complex in southern Phu Yen province, with the same capital to Foxconn’s, which is waiting for the Prime Minister’s approval. Other projects include steel plant worth US$4.5 billion by Fosco group in Khanh Hoa province; Van Phong coal-fired thermo-electricity plant valued at US$3.8 billion by Japan’s Sumitomo group, International University Urban Area in Ho Chi Minh City with capital of US$3.5 billion invested by Malaysia’s Berjaya Land Berhda Company, Giang Vo Trade Centre and Me Tri Exhibition Centre in Hanoi worth total US$2.5 billion by Sout Korea’s Kumho Asiana Group.
In the category, other 18 projects have investment capital of US$1 billion or more. If big projects are approved by the Government this year, total FDI in Vietnam will exceed the set target of US$12 billion.

Together with FDI, foreign indirect investment (FII) in recent time has also sharply increased. The investment of big international financial institutions in Vietnam’s stock market has continuously grown over the past time.

The data from Indochina Capital Group in Hanoi shows that foreign investors’ trading volume on the market in the past seven months accounted for 60 per cent of the total market trading volume. With the above figure, Vietnam has officially integrated into the international financial playground.

Magnetic Vietnam

Mr Tran Dinh Thien, Deputy Head of the Central Economic Institute said that Vietnam is in “honeymoon” phase in luring FDI. Chief Representative of the International Monetary Fund (IMF) in Vietnam Mr Houng Lee affirmed: “Vietnam has built faith of foreign investors in its commitments after joining WTO body. Vietnam is also attractive with abundant labour force, a stable social and political system and a devoted government.”

Recently, in the conference to collect ideas for the Draft on guiding the implementation of Vietnam’s investment pledges with WTO, Vice Chairman of the Chamber of European Trade in Vietnam Mr Jean-Pierre Achouche argued: “The Vietnam’s WTO membership has made Vietnam more attractive and outstanding on the world investment map. Vietnam will keep its position to be the second destination in the region in the next 5-10 years”.

This is optimistic signals, fuelling Vietnam in the economic reform in the past 20 years. However, many opinions warn of Vietnam’s shortcomings, apart from a strong growth rate of FDI.

If disbursement rate stood at US$2 billion in last several years, the improvement of infrastructure and traffic system will be more difficult with total FDI of US$5 billion this year. Accordingly, the disbursement of traffic projects has finished only 30 per cent of the full-year target, which has great influence on capital calling.

In addition, the shortage of energy, electricity, sea ports and the difficulties in infrastructure system, and site clearance for urban development are still hot issue for foreign investors. Mr Walter Blocker, President of the U.S. Trade Chamber in Vietnam pointed that the blocked situation in sea ports is a difficult-to-solve issue in Ho Chi Minh City where attracts largest FDI of the country.

In 2004, Ho Chi Minh City received 78 per cent cargo containers, while Cai Lan Port with only 19 per cent. In 2007, sea ports in Ho Chi Minh City fail to meet the increasing demands. The situation will worsen in two next years before Cai Mep Port is put into operation in 2010.

Vietnam is facing great integration pressure as well as big opportunities. If we do not keep our commitments with investors to foster administrative reform, improve infrastructure system, and other WTO commitments, as well as bilateral and multilateral agreements in integration process, it will be difficult for us to keep feet of foreign investors. This is a great challenge facing Vietnam in the post WTO period.

Vietnam Business Forum
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