Investment environment feared to be worsening
Several economists voiced concerns at the Finance-Banking Investment Forum, saying Vietnam is losing its advantages in attracting FDI due to its own internal weaknesses and the better environment elsewhere in ASEAN, despite upbeat forecasts by an FDI official at the gathering.
Dang Xuan Quang, deputy director of the Foreign Investment Agency under the Ministry of Planning and Investment, was confident in Vietnam’s success in FDI attraction.
"FDI disbursement is a huge success in Vietnam’s economic picture,” Quang told the forum.
The FDI official said FDI disbursements totaled US$6.25 billion in the year’s first seven months, equaling to 99.2% of that in the year-earlier period, while fresh FDI commitments also reached US$7.02 billion, or 67.7% of the year-ago figure.
Quang stressed that FDI disbursements this year would hit US$11 billion despite difficulties worldwide, while the fresh FDI amount would hit US$15 billion.
Of the total FDI disbursements, some US$8 billion will flow into the country and the remaining US$3 billion will be contributed by Vietnamese partners, according to Quang.
After 20 years of opening its door to foreign investors, Vietnam has attracted over 14,000 FDI projects worth US$206 billion. Some US$96 billion has been disbursed.
But experts were not that upbeat at the forum.
Nguyen Duc Thanh, director of the Hanoi-based Center for Economic and Policy Research, referred to concerns among the foreign community, especially the Japan International Cooperation Agency (JICA).
Two weeks ago, Thanh had a meeting with JICA representatives who wanted to study Vietnam’s macroeconomic situation.
"JICA representatives showed concerns over Vietnam’s economic future, especially after ASEAN brings down its barriers (in trade and investment relations) with China in 2015,” Thanh recalled.
By then, Vietnam’s geographical advantages no longer appeal, as foreign investors can set up production bases in other countries and import products into Vietnam, Thanh said, adding "both Eurocham and AmCham have expressed such worries recently.”
Thanh observed that FDI was still flowing into Indonesia, Thailand and Myanmar, but not substantially into Vietnam in the past two years.
"Macroeconomic uncertainty is the main culprit that worsens the country’s business environment and discourages foreign investors in Vietnam,” he stated.
Thanh quoted a report titled Doing Business issued by the World Bank to say Vietnam’s ranking has plummeted from the 78th position in 2011 to the 98th this year.
Tran Dinh Thien, head of the Vietnam Economics Institute, underscored that "the current situation can be seen as the worst since the country’s renovation (over 25 years ago).”
Over the past five years, Vietnam has been grappling with inflation and stagnation, but has not been able to escape from that vicious circle, Thien said.
Vu Dinh Anh, an economist with the Ministry of Finance, echoed Thien’s view, saying inflation would surely return in Vietnam later this year or next.
"This should be a warning, especially as the annualized inflation in Vietnam was still 10.41% as of end-August,” he noted.
Therefore, the chance to lower the mobilization interest rate in early October by the central bank has become more fragile, he added.
"After watching inflation issues over the past five years, I see that the current situation is changing quickly and unpredictably,… and input costs are rising,” Anh said.