Regional countries compete for FDI

Last year’s initial forecasts made at a Ministry of Planning and Investment (MPI) meeting to discuss Vietnam’s foreign direct investment scenarios in 2009 and 2010, put the nation’s registered FDI funds across 2009 at around USD20 billion, a sharp decline of 70 per cent in comparison with last year’s figure.

At the same time, the nation will be able to disburse between USD 9-10 billion of FDI capital, equal to that of 2008. However, early signs indicate that Vietnam could see a 10 percent rise in next year’s registered FDI and disbursed funds.

A MPI senior official, who declined to be named, said the forecasts accurately reflect the current situation, where a lot of FDI projects suffered from delays amid increased competition from regional rivals to attract FDI. “We have heard that neighbouring countries are trying to lure in investors who have had large-scale investment projects licensed in Vietnam by providing the investors with much better incentives. I’m afraid that these investors, such as world leading IT contractors Compal and Foxconn, will now delay their projects in Vietnam,” the official said.

In 2007, Compal Electronics, the globe’s second largest contract laptop maker, received an investment certificate to build a US$500 million facility in northern Vietnam with a monthly production output of 500,000 laptops in the first quarter of this year.

Two years ago, Foxconn announced that it would pump more than US$5 billion into Vietnam over the next five years to make it one of the largest manufacturing bases in the world. “We have to accept the alarming impact of the global economic crisis on Vietnam’s ability to attract FDI.

Our statistics revealed that industrial parks in at least 20 provinces in the country did not license any new FDI projects in the first seven months of this year,” said Tran Hong Ky, deputy director of the MPI’s Department for Economic Zones Management. He referred to an annualized drop of almost 40 percent to US$1.6 billion in FDI inflows into the country’s industrial parks between January and July of this year. Vietnam’s newly registered and expanded FDI funds for the first seven months of this year dropped sharply by 80 percent year-on-year, to just USD10.1 billion at the end of July, according to the MPI’s Foreign Investment Agency.

Funds that the nation disbursed between January and July saw a 22 percent decline from last year’s corresponding period, down to around USD4.6 billion. The reason was that various licensed FDI projects could not get off the ground because the global economic down turn forced international investors to trim back their investment expansion strategies worldwide. Noticeably, large-scale projects like a USD9.8 billion steel-making facility in the southern Ninh Thuan province and a USD1.2 billion software park in Ho Chi Minh City were facing their licenses being withdrawn.

Together with the slow progress of licensed FDI projects, the MPI is also concerned about the lack of FDI projects in the near future, in the face of the nation’s lower-ranking in the recent international community’s world investment prospects survey.

The World Investment Prospects Survey 2009-2011, released by the United Nations Conference on Trade and Development (UNCTAD) in July, ranked Vietnam number 11th on the list of favourable countries for FDI in the 2009-2011 period, compared to its sixth position in UNCTAD’s 2008-2010 survey. The study, which surveyed more than 240 of the largest non-financial transnational companies (TNCs), indicate that Vietnam remains an attractive destination out of developing economies in Asia, but not for TNCs from North America, like the US and Canada.