|
Vietnam’s FDI three years after joining WTO
Three years after Vietnam’s admission to the World Trade Organisation (WTO), the country has successfully grasped opportunities to overcome challenges thanks to its implementation of investment commitments.
Vietnam’s investment environment has improved remarkably by implementing investment commitments and renewing its legal system and policies on foreign investment in recent years.
After becoming an official member of the world’s largest economic body three years ago, Vietnam’s foreign investment increased from 16.2 percent in 2006 to nearly 31 percent in 2008. However, the figure dropped to 25.5 percent in 2009 due to the negative impact of the global economic downturn.
The country’s WTO membership has helped it attract more investment sources, with total investment across all sectors reaching the highest figure since Vietnam was admitted to the organisation. Total social investment compared to GDP reached 46.5 percent in 2007, 41.5 percent in 2008 and 43 percent in 2009.
Three years after its WTO admission, Vietnam has experienced a sharp increase in foreign direct investment (FDI). In 2006 when Vietnam completed negotiations on WTO accession, the country drew an FDI flow of US$12 billion. After it became an official member of the WTO in 2007, Vietnam’s FDI increased to more than US$21 billion. The country’s FDI hit a record in 2008, trebling 2008’s figure, reaching almost US$72 billion. Despite the negative impact of the global financial crisis, Vietnam’s FDI in 2009 was still higher than 2007’s figure, representing foreign investors’ trust in the nation’s economic development.
Vietnam has also made considerable achievements in investment disbursement. In the first five months of this year, FDI registered US$7.5 billion, while the disbursed investment reached US$4.5 billion. On average, Vietnam has disbursed around US$900 million in FDI per month since the beginning of this year. In addition, positive signs have also been seen in the country’s high export growth and effective business operations.
Nevertheless, there is growing concern about whether such increasing FDI flow can promote trade relations with other countries and increase foreign currency capacity or not.
Dr. Tran Dinh Thien, President of the Vietnam Institute of Economics, made an analysis of Vietnam’s growth model and raised concerns about the effects of FDI inflows. Even now there isn’t enough investment capital as required, it’s still necessary to consider the country’s capacity to receive and use foreign capital, he noted.
More often than not, large-scale investment projects committed to Vietnam would create disorder in the business environment. If Vietnam doesn’t prepare well, in terms of infrastructure, management and leadership, foreign investors will bring all their own facilities to the country, while Vietnam can only profit from leasing land.
Dr. Dinh Van An, Head of the Central Institute for Economic Management (CIEM), confirmed that the WTO’s impact on FDI in Vietnam is so great, that such investment is sometimes considered a boom for growth. However, how to use foreign capital is still far from effective, he emphasised.
Since 2000, Vietnam has taken strong measures to improve the business investment environment. Especially after Vietnam officially became a WTO member, facing the pressure of competition, there have been certain drawbacks of its capacity to absorb capital.
Economic expert, Pham Chi Lan, emphasised the importance of identifying the feasibility of projects in order to suspend or stop those failing to bring long-term benefits to Vietnam.
Although the registered amount of FDI capital is rather large, many issues need to be considered carefully, so that Vietnam will have suitable policies and effective measures to use foreign investment capital to full advantage in the process of national economic development.
vov
|
