Vietnam is attracting a large amount of FDI, but the Ministry of Planning and Investment (MPI) called attention to the quality of the capital and the speed at which it is disbursed, instead of the registered amount.

Rising tides

As cited by news site antaranews.com, earlier in May, Indonesian Vice President Jusuf Kalla said at a meeting at the vice presidential office in Jakarta that Vietnam and Thailand have become Indonesia’s competitors in attracting foreign investment in Southeast Asia, especially in the face of sluggish global economic conditions. 

He added that Indonesia should improve regulations and facilitate doing business to compete with Vietnam and Thailand.

The World Bank’s 2017 Doing Business report ranked Vietnam as the 82nd, while Thailand ranked 46thand Indonesia 91st. Through its efforts to improve the business and investment environment, Vietnam has become an attractive investment destination in the ASEAN over the recent years.

In 2016, Vietnam's registered foreign direct investment was $24.4 billion, including added capital contributions to existing companies and stake purchases by foreign investors. 

During the first four months of the year $10.95 billion was registered in FDI, up 40.5% on-year.

The Ho Chi Minh City People’s Committee has just chosen the Republic of Korea's conglomerate Lotte Group as the developer for the $2.2-billion Smart City at 2a functional zone in Thu Thiem New Urban Area. 

The project was proposed in 2015 and is planned to be built on an area of five hectares, with components such as the integrated financial, commercial, and service area and a multi-functional residential area.

Taipei Times reported that major members of Formosa Plastics Group are planning to invest $1 billion in the Vietnamese subsidiary to accelerate the construction of the $10.5 billion steel complex in the central province of Ha Tinh.

In the first four months of the year, the $2.5-billion Samsung Display project in Bac Ninh and the $1.27-billion Lot B-O Mon gas pipeline project by a Japanese-Vietnamese consortium have helped increase registered FDI significantly.

Quality over quantity

Though the Indonesian vice president named Vietnam as a contender, it actually trails behind both Indonesia and Thailand in attracting FDI. 

In 2016, according to the Indonesia Coordinating Board, Indonesia attracted $29.75 billion in FDI, higher than Vietnam’24.4 billion. Vietnam is still lagging behind Singapore and Thailand in FDI attraction, especially from the US or Japan.

Also, during the first four months of the year only US$4.8 billion FDI capital was disbursed, up 3.2% on-year. The figure was 15% in the first four months of 2016 and 7% in the first four months of 2015 showing that the rate of increase is on a decreasing trend. 

Experts said the suspended Trans-Pacific Partnership is causing investors to hesitate and after last year’s Formosa Ha Tinh crisis Vietnam has become more wary of potentially polluting projects.

At the April 2017 regular government meeting, MPI’s report stated that growth in disbursement is slower than the growth of registered FDI.

MPI proposed that cities and provinces nationwide take a look at slow-going projects and put appropriate measures in place and increase the quality of the capital attracted to prevent the slow disbursement.

MPI also bid local authorities to carefully monitor the area of land actually used by the project and the total investment, as well as price transfers, and prepare planning, land, infrastructure, and labour force to be ready.

“Cities and provinces should not turn Vietnam into a place that uses outdated technology, especially in the context that China is re-balancing its economy towards reducing reliance on investment and increasing consumption,” the report said.

MPI also said that the local authorities have to ensure the projects are appropriate to the master plan of the economic sector they belong to as well as international commitments, national security, and environmental protection.

VIR