The Vietnam government has done its best to create a favorable investment environment and in the 10 months leading up to November the nation’s economy is like a locomotive gaining momentum.

Minister of Planning and Investment Bui Quang Vinh adds that registered and disbursed foreign direct investment (FDI) along with the issuance of investment certificates during the period have been consistent with a stable business climate.

Dr Nguyen Dinh Cung, Central Institute for Economic Management (CIEM) Director in turn echoes Vinh’s views, saying Vietnam offers a welcoming environment for foreign firms that wish to establish a presence including solid economic growth and political stability among other things.

Though Vietnam has become more attractive with its tax incentives, low-cost labour, and long coastline and its increasingly modern and sophisticated port infrastructure, FDI attraction policies still naturally face some challenges.

To overcome these obstacles and continue to attract more FDI in the future, Vietnam needs to take a long-range view and develop a national strategy that embraces FDI as a powerful driver for sustainable economic development, Cung said.

According to the Foreign Investment Agency (FIA) during the 10 month period, newly registered FDI capital dipped by 23.9% to US$9.95 billion, representing a total of 1,306 projects.

Meanwhile the FIA reported supplementary capital for existing projects dipped 39.1% to US$3.74 billion for 469 projects.

Combined, this financially translates to a dip of about 28.9% on-year to US$13.7 billion of new and supplementary registered capital into Vietnam for the 10 month period. In explaining the cause of the declining FDI registered capital, FIA Deputy Director Nguyen Noi says the reduction was principally due to the reduction in the number of large scale projects this year as compared to 2013.

Right from the beginning of planning, we have anticipated fewer large projects and accordingly, the reduction comes as no surprise or cause for alarm, Noi notes.

There are a fewer projects having capital of more than US$1 billion each this year while the overwhelming majority (70%) of FDI projects have registered capital of under US$5 million that is the main cause of a decline in FDI capitalization this year, Noi concludes..

Tran Duy Dong, Director of the Ministry of Planning and Investment (MoPI)’s Economic Zone Management Department, agrees with Noi as saying in fact many foreign investors have continued to pour investment into their business in Vietnam.

This clearly has demonstrated their continued confidence in the country. Even some businesses from China and Taiwan (China) have invested in Vietnam this year. He cites the Samsung CE Complex and Samsung Display Bac Ninh projects, which each have registered capital of more than US$1 billion, as prime examples of the confidence of foreign investors in the country.

Most notably the FIA reports that in 10 month period, disbursed FDI actually jumped 5.9% to US$10.15 and the figure is expected to increase 8.7% to US$12.5 billion by the end of the year.

Foreign invested enterprises contributed US$82.48 billion to the nation’s export revenues (including crude oil), up 13.6% and comprising 67% of the country’s total export value.

All this adds up to the simple fact that Vietnam has continued to remain a safe and attractive destination for foreign investors, Don concluded.

Clear orientations needed

To improve FDI attraction, FIA Director Do Nhat Hoang says the agency has set a target to bump up the appeal for large-scale projects with more competitive products and plans to join global value chains of multinational groups.

At the same time the agency will pay appropriate attention to small-and-medium sized projects and strike a balance between the two. Furthermore, FDI attraction would focus on the supporting industry, industry, construction, services, and agro-forestry, Hoang says, noting that in the exploitation of natural resource, only projects using advanced and environmentally friendly technologies and machines will be granted licences.

To realise the target, Vietnam should have proper strategies in each market and take better care of investors who are operating in Vietnam. This is an important factor for the foreign investment community.

“Currently, some Vietnam localities, such as like Binh Duong, have been better at attracting foreign investment, because they support businesses and have timely and clear investment procedures. The model should be expanded in the future” says Professor Nguyen Mai.

For his part, Nguyen Dinh Cung says localities should outline clear and specific criteria for choosing investors and devise open and transparent policies for mutual benefit.

Economic, industrial zones attract investment flow

Industrial and economic zones have not only played a major role in attracting domestic and foreign investment capital but also significantly contributed to the country’s socio-economic development, the Vietnam Economic News reported.

As of September 2014, Vietnam had 295 established industrial zones, including 207 operational industrial zones with an average occupancy rate of 65 percent. In addition, the country also had 15 economic zones.

To date, industrial and economic zones have attracted 5,591 FDI projects with total registered capital of 118.1 billion USD, accounting for 49 percent of total FDI capital in Vietnam. In the first nine months of this year, industrial and economic zones attracted more than 600 FDI projects with total registered capital of 7.8 billion USD, accounting for 70 percent of total FDI capital in Vietnam.

Domestic investment in industrial and economic zones in recent years has also increased. Statistics showed that industrial and economic zones had attracted more than 512.028 trillion VND, accounting for more than 50 percent of total domestic investment capital. In the first nine months of this year, industrial and economic zones attracted 75.074 trillion VND, an increase of 16 percent compared to the same period last year.

According to the Ministry of Planning and Investment, thanks to attractive incentives for investment projects, in the coming time, investment capital in industrial and economic zones is expected to increase.

Tran Duy Dong, Director of the Economic Zone Management Department under the Ministry of Planning and Investment, was quoted as saying that industrial and economic zones had played a major role in the country’s socio-economic development. These zones have contributed 25 percent to the index of industrial production and accounted for more than 20 percent of Vietnam’s export value. In addition, these zones have created jobs for more than 2.3 million employees and this figure is expected to increase in the coming time.

Industrial and economic zones have recorded strong growth in business and production activities in the beginning months of this year. Total revenues of enterprises in industrial and economic zones reached over 55.7 billion USD. Export turnover stood at more than 35.7 billion USD. Meanwhile, import turnover totalled 34.7 billion USD. In the first nine months of this year, industrial and economic zones contributed more than 42 trillion VND to the state budget.

VOV/VNA/VNN