Vietnam is missing out on FDI boom

The Ministry of Planning and Investment’s (MPI) Foreign Investment Agency data shows that foreign direct investment (FDI) commitments to Vietnam in 2012’s first four months declined 31.5 per cent and FDI disbursement dropped 0.3 per cent from a year earlier, a stark contrast to global trends.

Despite global economic turmoil, global FDI inflows last year rose by 17 per cent, to $1.5 trillion, surpassing their pre-crisis average, according to United Nations Conference on Trade and Development (UNCTAD).

Based on the factors such as gross domestic product (GDP) growth and cash holdings by transnational corporations, UNCTAD estimates that FDI flows will rise moderately in 2012, to around $1.6 trillion.

“It seems that Vietnam is losing out in catching global FDI inflows. Foreign investors are neglecting Vietnam to make investments in other nations,” said Nguyen Mai, president of Vietnam Association of Foreign Invested Enterprises.

Meanwhile, FDI in Indonesia rose by a massive 30 per cent to $5.7 billion in the first quarter compared to the same period in 2011, the highest ever recorded for any quarter in Indonesia’s history, according to the Indonesia’s Investment Coordinating Board.

At the same time, FDI rose 91 per cent in Thailand, confirming the continued strong confidence of foreign investors in this country, according to Board of Investment of Thailand.

“These figures mean that foreign investors, especially transnational companies, still have  lots of money and are expanding investment around the world. The question is that why they didn’t increase investment in Vietnam?” said Mai.

To grab the opportunity of global FDI boom, Vietnam should put greater efforts on beautifying its business climate by continually improving legislation system, infrastructure network and human resources, he said.

Specifically, Prime Minister Nguyen Tan Dung last September issued Directive 1617/CT-TTg asking ministerial bodies and local authorities to “intensify” and “regulate” FDI management systems.

However, foreign investors are unconvinced.

Hong Sun, general secretary of Korea Chamber of Business in Vietnam, said Vietnam’s investment climate had become “worse and worse” since 2008 because of the economic turmoil and regular changes in government policies.

“The government is tightening conditions for investments in Vietnam and increasing taxes, land fees, while slowly handling obstacles including poor transport infrastructure systems, power outages and a lack of skilled labourers,” said Sun.

Mai warned the FDI in Vietnam would continue decline as foreign investors have plenty of options in neighbouring countries. Japanese companies, for example, are increasingly investing in Vietnam, but they are also increasing investments in neigbouring countries.

Statistics from Japan External Trade Organisation  showed that the number of Japanese FDI projects from 2008 to 2011 in Thailand hit 1,393, in Indonesia 1,045 and Vietnam 572.

On the other hand, total Japanese FDI capital during the same period in Thailand was $13.3 billion, in Indonesia $4.2 billion and in Vietnam $5.5 billion.