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Vietnam’s FDI prospects bright for 2010
The disbursement rate of foreign direct investment (FDI) projects in 2010 is expected to increase by 10 percent over 2009.
The Central Institute for Economic Management (CIEM) has predicted this percentage in its basic scenario for Vietnam’s 2010 national economic development. Within their estimates, the disbursement rate of FDI projects in 2010 may reach $11 billion.
Under CIEM’s optimistic prediction, with the expanded recovery of the world’s economy, the disbursement rate of FDI projects in Vietnam in 2010 would increase by up to 20 percent in comparison with 2009.
FDI prospects are very bright, according to Dau tT newspaper. Standard Chartered Bank, in its latest report about FDI, concluded that, even considering the global financial crisis, Vietnam is capable of attracting $10-15 billion in FDI capital annually, much higher than the $7-9 billion of the last two years.
Standard Chartered cited that, besides Vietnam’s advantage in cheap labour costs, multinational groups can be persuaded to invest in Vietnam because of their need to diversify risk.
Asian investors are seeking opportunities in Vietnam in the production and tourism sectors. US and European companies will also push up investment and seek opportunities in Vietnam, according to Standard Chartered.
The bank’s predictions are reasonable. Statistics show that, by June 2010, the FDI disbursements reached $5.4 billion, an increase of 5.9 percent in comparison with the same period of 2009.
Financial experts believe that the FDI capital disbursement plan is within reach. Officials of the Foreign Investment Agency, under the Ministry of Planning and Investment, also think that actual disbursement will fit the disbursement rate predicted earlier this year.
Nevertheless, financiers have also pointed to obstacles. The number of projects that expand the investment scale has been on the decline. In the first six months of 2010, only 121 projects sought permission to increase investment capital. The total capital they registered to increase was just $525 million, or just equal to 10.7 percent of the same period of 2009.
Nowadays, financial analysts constantly talk about the tendency of multinational groups to shift their production bases from China to other countries, due to increasingly high Chinese labour costs. Yet Vietnam does not have policies and infrastructure good enough to attract these investors.
In its analysis, Standard Chartered Bank stressed that, in the modern distribution chain, even the best products need to be distributed effectively.
While many other countries have the labour costs lower than China, multinational groups are still buying Chinese goods, because the logistics and infrastructure conditions allow producers to deliver goods on schedule. As a result, countries with poorer conditions, including Vietnam, must bear hard pressure in competition with China.
Moreover, problems in labour costs, regular power outages in the dry season, and site clearance difficulties have also been cited as major issues that hinder implementation of investment projects in Vietnam.
The new West Lake urban area project in Hanoi has made no considerable progress after the South Korean investor wrapped up its money transfer to support site clearance as per request by the Hanoi People’s Committee. Dau Tu quoted its sources as saying that difficulties are still impeding the site clearance.
vietnamnet, Dau tu
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