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Manufacturing sector a magnet for investors
Vietnam’s manufacturing sector has proven a magnet for foreign direct investment inflows in 2013, but property showing a turn off for foreign players.
The Ministry of Planning and Investment’s (MPI) Foreign Investment Agency (FIA) last week reported that foreign direct investment (FDI) commitments in 2013’s first half hit $10.47 billion, up 15.9 per cent from one year ago. Of which, a giant $9.3 billion was committed in manufacturing sector, with retail, property, information technology and communication, logistics and construction making up the rest.
The disbursement FDI capital at the same time was $5.7 billion, up 5.6 per cent in comparison with the same period last year.
“Most FDI projects in terms of manufacturing this year in Vietnam come from export-oriented foreign companies like Samsung Electronics, Canon and Panasonic. Therefore, their investments are not affected by Vietnam’s slowdown economic situation,” said MPI Deputy Minister Dao Quang Thu.
“The recovery FDI data underscores that Vietnam’s fundamental advantages like labour cost, geographical and political stability continue to be attractive to foreign investors to set up manufacturing bases here,” he added.
Samsung Electronics just two weeks ago received an investment certificate for its $1 billion investment expansion plan in northern Bac Ninh province, that strengthens the Korean group’s commitment to make Vietnam its largest manufacturing base in the world.
The export growth of foreign-invested enterprises (FIEs) in Vietnam also supports this trend as the FIA data for the first half of this year reported that FIEs’ export revenue in 2013’s first half, excluding crude oil export, was estimated at $37.37 billion, a 28.3 per cent rise and accounting for two-thirds of the country’s total export value.
While investment inflows from export-oriented companies remain steady, investments in sectors driven by the domestic market are still modest. In 2008 and 2009 FDI in Vietnam’s property sector accounted for almost half of the total FDI sum, but now it accounts for only 4 per cent. Other sectors like retail and construction just account for 1.7 and 0.7 per cent respectively.
Phan Huu Thang, director of Centre for Foreign Investment Studies under Hanoi-based Vietnam National University, said foreign investors were cautious about investing in such sectors driven by the domestic market because of low consumption.
“I don’t think this is a good time for foreign investors to expand business in Vietnam to tap on the local market, as consumers are tightening their belt to reduce consumption,” said Thang.
The MPI reported in 2013’s first half that the total retail and services revenue rose 11.9 per cent in comparison with 19.7 per cent at the same period last year. If excluding price increases, revenue rose only 4.9 per cent, lower than 6.7 per cent last year. “Despite the improvements in the recent months, the total revenue of retail and services remains low,” the ministry said.
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