VietNamNet Bridge – The foreign direct investment (FDI) flow into Vietnam in 2010 witnesses many surprising changes. For the firs time, the Netherlands has become the biggest foreign direct investor in Vietnam.

The disbursement rate has been improvedsignificantly, while the registered investment capital has been decreasing sharply. In previous years, real estate was the sector which attracted most of FDI capital. However, in 2010, processing and manufacturing have become more attractive in the eyes of foreign investors. The Netherlands has become the biggest foreign investor in Vietnam instead of South Korea or the US.

Phan Huu Thang, former Head of the Foreign Investment Agency under the Ministry of Planning and Investment, now Director of the Centre for Foreign Investment Studies CFIS, said that the changes have been caused by the global financial crisis as well as the internal problems of Vietnam’s economy

FDI in 2011?

In the first 11 months of 2010, the registered capital has decreased by 40 percent, but the disbursed capital has increased by 10 percent in comparison with the same period of the last year. In previous years, experts complained that while the registered capital was big, the disbursed capital was modest, which meant that though foreign investors registered projects, they did not implement them. However, analysts say the gap between the registered and implemented capital has been narrowed.

Thang said that some Vietnam’s traditional partners such as South Korea, Taiwan, the EU and the US have controlled their outward investments more tightly, since their own economies have been recovering very slowly. “This has been affecting the FDI into Vietnam,” Thanh said.

Meanwhile, Vietnam still shows a lot of shortcomings, including the electricity shortage, poor infrastructure and the tardiness in licensing investment projects. Besides, Vietnam’s labour force quality has not upgraded

“I think that we need to take drastic measures to settle these problems, or the FDI may further decrease in 2011,” he said

However, Thang stressed that the FDI disbursement remains very good since the Government has been making every effort to speed up the disbursement.

According to CFIS, the FDI capital in 2011 would not increase considerably in comparison with 2010, about $11-12 billion. In the long term, CFIS believes that in 2010-2015, the FDI capital may reach 150 billion dollars, of which 50 percent will be implemented.

Foreign capital into real estate sector slows down

After holdingthe leading position among the sectors that attracted most of FDI in 2009, accommodation servicefell to the sixth position in the list, while the real estate sector has fallen to the third position, replaced by the manufacturing industry.

“In the real estate sector, the supply is now bigger than the demand. The implementation of many foreign invested projects has been going slowly, especially in the south,” Thang said.

He believes that the FDI in the construction and manufacturing will continue increasing in 2011.

The Netherlands phenomenon

Commenting on the changes in the ranking of foreign investors in Vietnam, Thang said that the Netherlands’ first position came as a surprise?.

The Dutch investor makes up 90 percent of the total investment capital of $2,1billion in Mong Duong Power plant 2. The project was wrapped up in 2010 after many years of negotiations. Therefore, with the huge project, the Netherlands has become the leading foreign investors in Vietam in 2010.

In general, EU countries and the US keep an optimistic view about Vietnam’s investment environment, while South Korea and Japan also highly appreciate Vietnam as an investment destination. In a time perspective, from 1988 up until now, the main foreign investors remain East Asian countries such as Japan, South Korea and Taiwan

Source: Thoi bao Kinh te Vietnam