FDI drop flags risk adverse sentiment
Ministry of Planning and Investment’s (MPI) Foreign Investment Agency (FIA) figures last week indicated that newly-licenced foreign direct invested (FDI) projects in November registered $726 million in investment capital – a sharp drop from $2.02 billion in October and roughly $9.9 billion in September, when the financial crisis broke out in the US.
New projects put total FDI capital in the country between January and November at almost $59 billion - a slightly higher sum compared to $58.3 billion during January-October. FIA chief Phan Huu Thang said at the MPI’s final annual review meeting two weeks ago that the recent reduction in new FDI projects had led the ministry to shrink 2009’s FDI target.
“It will be a hard job attaining $30 billion in newly-licenced FDI projects next year – a reduction of 50 per cent from this year,” Thang said.
“In a difficult context, to maintain Vietnam’s image as being a cherished investment destination and removal of foreign investors’ constraints will be crucially important to keep the set target possibly afloat,” he continued.
Corporate expansion is also a growing concern. Vietnam Business Forum’s 2008 survey indicated that the number of interviewed enterprises reluctant to expand their business doubled from 2007 as a result of the recent economic difficulties.
FIA figures show that expanded FDI projects numbered 242, adding $1.08 billion to the nation’s new FDI fund between January-November this year. However, the expanded FDI capital amount for 11 months this year dropped roughly 60 per cent from the corresponding period last year.
According to FIA figures, expanded FDI capital reportedly declined from $2.9 billion in 2006 to $2.6 billion in 2007. FIA forecasts put the expanded capital at around $1.2 billion across this year and $1 billion next year.
“Many foreign investors have chosen registering new investment projects in Vietnam instead of applying for expanding existing projects. Their preference is due to Vietnam’s simpler and more transparent formalities in relate to registering new businesses in accordance to new investment and enterprise laws passed in 2005,” Thang said.
For example, this year Holcim cement venture will start building a second phase with $656 million investment of its operating cement factory in southern Kien Giang province and E-United steel firm applied adding $2.4 billion in its under-construction manufacturing facility in the central Quang Ngai province.
Thang said that immediate implementation of large-scale FDI projects licenced this year like the $9.8 billion Lion Group and Vinashin steel facility, the $7.8 billion Formosa and Sunsco steel facility and the $3.5 billion Berjaya university and urban town complex would also brighten Vietnam’s disbursed FDI capital by the end of this year.
For 2008’s first 11 months, the nation’s disbursed FDI sum reached $10 billion – a 25 per cent increase from 2007’s figure.
