FDI forecast warily brightens

On-year FDI numbers are expected to rebound by year’s end, due to new power plant licensing Photo: Le Toan

The country attracted over $17.61 billion in newly-registered and expanded foreign direct investment (FDI) capital in the year to October 20, down 8.7 per cent on-year, according to the Ministry of Planning and Investment (MPI).

This was the second time in 2016 that Vietnam reported a fall in FDI attraction. In September, the country also witnessed a slight on-year drop of 4.2 per cent in new and added FDI pledges.

“This slight fall was blamed on the fact that some power projects were still waiting to complete procedures to get licences,” Dang Xuan Quang, deputy director of MPI’s Foreign Investment Agency (FIA), told VIR. Meanwhile, in the same period in 2015, the country licensed some big power projects, including the $2.4 billion Duyen Hai 2 thermal power plant, thus increasing its total newly-registered and expanded FDI to $19.29 billion.

“The FDI attraction is forecast to have a brighter outlook in the remaining months, as the country is expected to license two power projects worth billions of US dollars. In addition, the cities directly under the government’s management are seeking investment licences for projects worth over $2 billion in total,” he added.

Quang predicted that – besides traditionally attractive sectors such as the processing and manufacturing industry and realty – energy, agro-forestry, and seafood processing will be among the targeted areas for FDI in the next few months.

The FIA aims to attract $13 billion worth of FDI in the second half of 2016, up 15 per cent from the first half, thus bringing the country’s total committed FDI to $24.5 billion this year, up 6.5 per cent on-year.

The agency also aims to have nearly $8 billion worth of FDI disbursed between July and December, up 10 per cent from the first half, increasing the country’s total FDI disbursement to $15 billion.

This year’s 10-month FDI disbursement is estimated to be $12.7 billion, up 7.6 per cent year-on-year.

“The FDI attraction goal for 2016 can only be achieved if the country licenses several projects worth billions of dollars in the last two months of the year,” said Nguyen Mai, president of the Vietnam Association of Foreign Invested Enterprises.

Mai added that Vietnam’s business climate has improved. This will be a driving force for the country to attract more FDI in the near future.

The FDI sector earned $102.7 billion from exports (including crude oil) during January-October, up 8.1 per cent year-on-year. This accounts for 71.2 per cent of the country’s total export turnover which was estimated at $144.1 billion, up 7.2 per cent.

The country enjoyed a trade surplus of $3.52 billion, while foreign invested firms gained a trade surplus of $19.48 billion.

The total export turnover of mobile phones and their spare parts during the period was estimated to reach $28.3 billion, up 10.3 per cent year-on-year. Most of this sum came from Samsung.

Nguyen Bich Lam, head of the General Statistics Office, said the Galaxy Note 7 incident reduced Samsung Vietnam’s profit but did not have a significant impact on the export turnover of the firm’s smartphones. “Export of this product does not occupy a big share of Samsung Vietnam’s smartphone exports.”

It is reported that the withdrawal of the Galaxy Note 7 worldwide due to battery incidents caused a $1.1 billion dent in Vietnam’s export turnover in September.

Mai said, “Samsung has boosted exports of other types of phones, compensating for the loss of the Galaxy Note 7. This has made the giant company remain a significant contributor to Vietnam’s 10-month exports.”

Employing over 110,000 local employers and having invested nearly $7 billion in Vietnam, Samsung will likely account for nearly 20 per cent of Vietnam’s total export turnover this year – an expected $175 billion.

It is expected that Samsung will reach an export turnover of $34.7 billion this year, up from over $30 billion last year.

Mai noted that the FDI sector is currently the key driver of the economy’s growth and exports. “The sector is performing very well, with hundreds of our association’s member companies like Samsung reaping high profits in Vietnam.”

The World Bank’s “Doing Business 2017” report, released in late October, showed that Vietnam ranked 82nd among 190 economies in terms of ease of doing business, up nine notches against the previous year.

Infrastructure, high-tech, high-tech agriculture, and real estate will be the most attractive sectors to foreign investors in the near future, Mai predicted.