FDI helps anchor the economy in a storm

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Foreign investors last month disbursed $950 million in Vietnam, raising total net foreign direct investment (FDI) from January to September to $8.2 billion, up 2 per cent year-on-year.

In June and July, net FDI slightly declined 1.9 and 1.6 per cent on-year. It started to rebound in August 2011.

“FDI inflows into Vietnam are still very positive,” said Do Nhat Hoang, director of the Ministry of Planning and Investment’s Foreign Investment Agency.

Though the newly committed FDI from January to September slid 28 per cent year-on-year to $9.9 billion, Hoang believed FDI disbursement could reach $11 billion by the year’s end.

His forecast was pinned to commitments of investors like Panasonic Corporation, AES Corporation, Posco Power, Jaks Resource and First Solar becoming a reality.

Given the government is cutting and delaying nearly $4 billion in public investment including investments by state-owned companies to rein in inflation, which hit 22.42 per cent on-year in September, analysts have said FDI disbursement is a driving force for economic growth.

The General Statistics Office reported that the economy grew at 5.76 per cent in the first nine months  of this year against 6.52 per cent a year earlier. This year’s economic growth is targeted at 6 per cent to ensure jobs and social welfare.

Vu Dinh Anh, an economist at the Institute for Market and Prices, said this target would not be reached if FDI disbursement slowed down.

“Overall, foreign investors are still confident in Vietnam’s long term prospects and will continue investing here,” said Anh.

Anh said increased FDI disbursement would not spark inflation due to its high economic efficiency. In a recent report, the Asian Development Bank pointed out that while state-owned enterprises’ return on equity  hang around 14 per cent, foreign invested enterprises  (FIEs) recorded a ratio of 22 per cent.

The net FDI inflows are also appreciated for helping Vietnam compensate trade deficit and expect a surplus in the balance of payments this year.

Vietnam’s trade deficit was estimated at $6.8 billion by September this year, equivalent to 9.8 per cent of  the country’s total export turnover.

The Sate Bank expected Vietnam’s surplus in its balance of payment could reach $2.5-4 billion.

FIEs have also accounted for 54 per cent of the country’s total export turnover with $38 billion during the past three quarters, a 37.5 per cent rise year-on-year.