Property FDI plummets

December 05, 2011 | 07:01
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The reduction of FDI raises concerns about the economic prosperity of Vietnam because at present the domestic economy is heavily dependent on capital investment from outsite

Foreign direct investment into Vietnam’s property sector has plummeted to a five-year low and there are no signs of a rebound any time soon.

New figures from the Foreign Investment Agency show that foreign direct investment (FDI) into property accounted for a meagre 3.7 per cent of all FDI commitments into Vietnam up to the end of November. The total amount invested was just $434 million.

Last year, newly registered capital in the property sector was $6.84 billion, or 36.8 per cent of total foreign investment in the country.

But from January to the end of November, only 19 new FDI property projects were registered in Vietnam. In the same period, four existing projects were expanded. This compares with 27 projects newly registered and expanded last year.

Le Xuan Nghia, deputy head of the National Financial Supervisory Committee, said: “I think this reduction was caused by both negative internal and external factors. In terms of external factors, it was caused by the global financial crisis and for negative internal factors, it was caused by instability of the domestic economy, including high inflation, non-synchronous zoning, and shortage of key infrastructure facilities.”

He said that infrastructure issues included power, electricity, services, highly qualified human resources, a prolonged project approval process, land clearance and compensation.

“The reduction of FDI raises concerns about the economic prosperity of Vietnam because at present the domestic economy is heavily dependent on capital investment from outside [the country], while the domestic savings proportion has been lower level than the investment level for many years,” said Nghia.

However despite the sharp downturn, foreign investors are still optimistic about the domestic property market. David Blackhall, deputy managing director of VinaCapital Real Estate, still believed Vietnam would continue attracting FDI into the property sector.

“Even though global FDI inflows shrunk by half from 2007 to 2010, Vietnam still maintained its 12th place in the Top 20 FDI Confidence Index, released by A.T Kearney in 2010,” Blackhall said.
In other positive news, many familiar names like Singapore’s CapitaLand Group, Malaysia’s SP Setia and Indochina Capital are expanding activities in Vietnam.

In May, CapitaValue Homes Limited, CapitaLand Group’s strategic business unit which focuses on building good value homes in Asia, clinched to deal to buy a 65 per cent stake in domestic Quoc Cuong Sai Gon Company for a cash consideration of $5 million.

By acquiring stakes in this company, the Singaporean developer will get involved in the development of a 9,000 square metre site in Binh Chanh district, Ho Chi Minh City.
SP Setia, meanwhile, is pushing the construction of its EcoLake and EcoXuan in southern Binh Duong province.

By Linh Ngoc

vir.com.vn

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