Vietnam posts strongest ASEAN economic growth

Disbursed FDI is expected to strike US$14 billion, US$1.5 billion more than last year—while newly registered foreign investment is forecast to top last year's figure of US$21.9 billion, according to official statistics.

“Our improving investment environment and free trade agreements are helping to entice companies such as Samsung Electronics to relocate from China and other regional countries to Vietnam,” said Planning and Investment Minister Bui Quang Vinh recently at a conference in Hanoi.

Additionally, Minister Vinh partly attributed the increased levels of FDI to initiatives undertaken by the government earlier this year to ease the burden business regulations place on companies operating in the country.

“The elevated levels of FDI come at a time when neighbouring countries such as the Philippines are reporting stagnant investment figures,” said Vinh.

The country stands to be the biggest winner in the Southeast Asian region from a number of free trade agreements in the offing, which many predict will stimulate exports as tariffs are reduced and other non-tariff barriers are reduced.

Vinh said the primary industries benefiting from the higher levels of investment are footwear, clothing and textiles.

FTAs could boost Vietnam's gross domestic product (GDP), which includes products and services produced by both foreign and domestic companies, by about 8% over the next 20 years, the World Bank said in a report last week.

However the FDI is forecast to do little for the nation’s Gross National Product (GNP), which doesn’t count products and services generated by foreign companies, as domestic companies remain largely non-competitive in the global marketplace.

World Bank economist Pham Minh Duc believes the country’s clothing industry will be the biggest beneficiary of foreign investment over the next 20 years as free trade agreements stimulate exports machining it easier to attract FDI.

However, Duc cautions the increased levels of production in the industry brings with it serious issues related to environmental pollution. Phrases of dyeing will likely cause serious damage to Vietnam’s already badly polluted environment.

“Capital inflows provided by FDI are very important for Vietnam as the nation struggles to bring its economy and standard of living on par with industrialized nations,” said Trinh Nguyen, a Hong-Kong based senior economist for emerging Asia at Natixis SA.

“This is a much more stable way to access funding for investment, which Vietnam so badly needs at this level of development.”

Out of the six major countries in the ASEAN 10 member bloc, Vietnam is expected to post the strongest economic growth in 2015, the Asian Development Bank (ADB) has reported.