Posted on 15 Apr 2015
The Foreign Investment Agency (FIA) expects foreign direct investment (FDI) approvals to amount to a total of US$18 billion this year, with more than US$12 billion of it to be disbursed.
The figures are seen obtainable as Vietnam is becoming a favorite destination for global manufacturers, heard a seminar in Hanoi City on April 9 on impact of FDI on Vietnam’s economy.
Do Nhat Hoang, director of FIA under the Ministry of Planning and Investment, told the seminar that the agency hopes FDI disbursements would exceed US$12 billion this year.
Vu Hoang Duong from the Vietnam Institute of Economics said FDI disbursements reached around US$10 billion a year in 2008-2013 irrespective of FDI approvals. This raised concerns that Vietnam’s FDI absorption was weak.
Hoang said Vietnam issued a decree on foreign investment as early as in 1977 but attracted no projects between 1977 and 1985.
In the late 1980s, the nation introduced the Law on Foreign Investment. Then, the U.S. lifted its embargo against Vietnam in 1995, paving the way for foreign companies to enter the country.
The FDI sector is now responsible for 22-25% of the country’s total development investments and 15% of the State budget, Hoang said.
“We can say for sure that Vietnam’s economy would not have achieved high growth if it had been without FDI,” Hoang stressed. “If we want our country to grow, we should open the door to let money in and this source of funding together with domestic capital will spur economic growth.”
Hoang rejected concerns that Vietnam is giving a lot of incentives to FDI enterprises.
Professor Nguyen Mai said Vietnam is becoming a place of choice for multinationals, especially Samsung, Intel and Canon.
Vinh Phuc Province has made breakthroughs thanks to FDI projects. When it was separated from Vinh Phu Province, its annual tax collections totaled a mere VND100 billion but last year the figure skyrocketed 1,160 times.
Another northern province, Bac Ninh, has also changed for the better thanks to the presence of major foreign investors like Samsung, Canon and Nokia.
However, Vu Quoc Huy, deputy head of the Economic Zone Authority, said FDI projects have yet to leave as strong impact on the economy as expected.
For instance, Canon invested over US$300 million in Vietnam in 2001 and had seven suppliers at that time. Now, the firm has over 100 suppliers with local content accounting for over 60% but Vietnamese firms make up nearly 10% of the total number of suppliers.
In addition, the ratio of Vietnamese suppliers for Samsung is below 10%.
The figures suggest that Vietnamese firms have an insignificant presence in the value chains of foreign enterprises. Local enterprises have not been able to produce highly precise spare parts, Huy said.
