New FDI outlook is needed

According to the United Nations Conference on Trade and Development (UNCTAD) in early 2010, global investment was estimated to reach $1.2 trillion this year and $1.3-1.5 trillion next year. Of the sum, 4 per cent would go to developing countries with Vietnam remaining a magnet to foreign investment capital (FDI) following the BRIC  nations - Brazil, Russia, India and China. The assessment was based on the country’s short and long-term prospects in market volume and investment environment.

Vietnam’s vast labour pool needs to step-up its skill levels

However, the country’s recent poor performance of disbursed capital followed by the long-enduring weaknesses in infrastructure system, unstable macro-policies, stagnant formalities and lack of qualified human resources are demanding the country a quick turn in its long-term strategies.

Professor Nguyen Mai, at a VIR seminar in Ho Chi Minh City last week on the Vietnamese economy’s opportunities and challenges in the post-crisis period, said plentiful labour with reasonable costs, which had long been to Vietnam’s advantage to attract foreign investors, were becoming a disadvantage.

“Vietnam can no longer purely use its labour pool as it has but needs to invest in it before getting onto the labour market,” said Mai, taking Intel chipset factory in Ho Chi Minh City as an example. The firm has been in the country for four years, but failed to expand its operation due to a lack of highly-skilled engineers.

According to Mai, former vice chairman of the State Committee for Cooperation and Investment (SCCI) - now the Ministry of Planning and Investment (MPI), FDI enterprises in Vietnam have absorbed some 1.7 million local people since the first FDI project. But, the country needs almost the same amount every year for the labour market.

Asia Commercial Bank general director Ly Xuan Hai said: “Vietnam has three-five years to use up its low labour cost advantages, while its natural resources exploitation will last for about 10 years more.”

“The country also needs to step out to choose suitable projects and investors to help enhance FDI disbursement and stabilise socio-economic growth,” said Mai.

As stated by the MPI’s Foreign Investment Agency (FIA), in 2008 registered FDI was $71.7 billion but the actual disbursement was only $11.5 billion. In 2009, the values were $21.48 billion and $10 billion, respectively. In 2009, the number of countries investing in Vietnam also plunged.

As of August 2010, foreign investors in Vietnam have disbursed $7.25 billion, rising 3.6 per cent from a year earlier. The country is expected to attract $22-25 billion in registered FDI capital in 2010. The disbursed capital is estimated to reach $11 billion, up about 10 per cent from 2009.