Vietnam to see surging FDI

Deputy Minister Nguyen The Phuong stated that under Vietnam’s new strategy to draw in foreign direct investment (FDI) for the 2016-2020 period, total FDI (excluding locally-contributed capital) is expected to reach around $65.5-72.8 billion, occupying 14.7-15 per cent of Vietnam’s total development capital for the period (see table).

“In order to attract such a sizeable volume of FDI, the local business climate will be further reformed in order to take full advantage of free trade agreements (FTAs),” Phuong said at a recent meeting on Vietnam’s socio-economic environment organised by the National Assembly’s Economic Committee.

“A large part of this capital will come from hi-tech and environmentally friendly projects that are also labour intensive,” he said.

According to the Ministry of Planning and Investment (MPI), over the next five years the government will prioritise projects on developing supporting industries, renewable energy, new materials, electronics, information and technology, biological technology, human resource training, and high-quality health care.

“Special projects will receive special incentives. Founding research and development centres will be strongly encouraged,” said an MPI report highlighting Vietnam’s potential FDI attraction for the 2016-2020 period.

At the same time, the government will reject projects that consume high amounts of energy, unprocessed natural resources, or out-dated technology, as well as projects that are likely to pollute the environment.

Kim Kyong Keun, head of Korea Trade-Investment Promotion Agency’s Investment Support Division, said that Vietnam is expected to attract more and more FDI in the near future, and the country’s economic growth would continue to rely on foreign-invested enterprises (FIEs), which held 68.2 per cent of Vietnam’s total export turnover last year.

This rate has been steadily rising over the past few years, from 49.1 per cent in 2011 to 62.5 per cent in 2014.

FIEs’ import ratio of Vietnam’s total import turnover also climbed from 45.7 per cent in 2011 to 57 per cent in 2014, ultimately reaching 58.7 per cent last year.

“One of the reasons behind an expected surge of FDI into Vietnam is that Vietnam has joined and will join many FTAs,” Keun said.

For instance, after the Trans-Pacific Partnership takes effect (slated for early 2018), the Vietnamese textile export turnover to the US, EU, and Japan will increase to an expected $30 billion by 2020.

Also, thanks to the ASEAN Economic Community, many Thai, Singaporean, and Japanese firms entered the mergers and acquisitions market in Vietnam, said Keun, adding that Korean firms were likely to join in the action as well.

According to the MPI, FDI contributed greatly to Vietnam’s socio-economic development over the past five years, with a total disbursed sum (including locally-contributed capital) of $60.5 billion, up 35.6 per cent compared to the 2006-2010 period. Disbursed FDI in 2011-2015 steadily increased from $11 billion in 2011 and 2012 to hit $14.5 billion last year.

In the same period, total newly-registered and newly-added FDI reached $99 billion.

In the first two months of this year, Vietnam drew in $2.8 billion of newly-registered and newly-added FDI (up 35 per cent on-year), with a total disbursement of $1.5 billion (up 15.4 per cent on-year).

Last year, the country attracted $22.8 billion in newly-registered and newly-added FDI (up 2.5 per cent on-year), with a total disbursement of $14.5 billion (up 17.4 per cent on-year).