From the beginning of the year to mid-December 2013, the sources of foreign direct investment (FDI) in Vietnam reached about US$21.6 billion, up 54.5 percent from the same period of 2012 and far exceeding the initial targets set by the Ministry of Planning and Investment (MPI). The figure is very significant, particularly in the context the global and national economies having not yet recovered.
Impressive figures
Since early 2013, the Ministry of Planning and Investment had cited some assessment reports by international organisations and economists that the economy of the world and Vietnam in 2013 would still face many difficulties and challenge so FDI could not strongly recover in 2013.
Therefore, registered FDI in 2013 was expected to reach about US$13 to US$14 billion, which is equal to that of 2012, which was US$13.01 billion. However, the recently published data showed the results that far exceeded the expectations.
The reimbursed FDI of Vietnam in 2013 reached US$11.5 billion, up 9.9 percent over 2012. This result is slightly higher than the initial goals set by MPI of US$10.5 to 11 billion.
FDI in 2013 mainly focuses on the processing and manufacturing industries, with US$16.6 billion which accounts for 76.9 percent of total registered capital. Manufacturing and distribution industries of electricity, gas, hot water, steam and air conditioning reached US$2 billion, accounting for 9.4 percent, and the remaining industries reached US$3 billion, accounting for 13.7 percent.
Of the 50 provinces and central cities, newly licensed investment projects are no longer flowing into Ho Chi Minh City, Hanoi and Binh Duong, which are have long been the strongest areas in FDI attraction; now projects have been shifted to other localities. In particular, Thai Nguyen has become the first province to attract the highest FDI of the country, reaching about US$3.4 billion which accounts for 23.7 percent of total newly registered FDI.
Some other provinces, which also attract quite high investment, include Binh Thuan with nearly US$2.03 billion accounting for 14.2 percent and Hai Phong with over US$1.8 billion accounting for 12.9 percent, of which the most significant investment project of manufacturing complex electronics in the Trang Due Industrial Zone in Hai Phong is registered at US$1.5 billion by the LG Electronic (South Korea). Besides, Binh Dinh has another investment project of nearly US$1.02 billion accounting for 7.1 percent; Ho Chi Minh City receives investment of about US$949 million, accounting for 6.6 percent; and Dong Nai more than US$745 million, accounting for 5.2 percent.
As such, among 50 countries and territories with newly licensed investment projects in Vietnam in 2013, South Korea is the biggest investor with over US$3.75 billion, accounting for 26.3 percent of total newly registered capital and Singapore, the second largest with over US$3.014 billion, accounting for 21.1 percent; and other big investors include China with about US$2.28 billion, accounting for 16 percent, Japan with nearly US$1.3 billion, accounting for 9.1 percent and Russia with US$1.02 billion, accounting for 7.2 percent.
Positive impacts of FDI
The important thing is not only the increasing foreign investments but also the great impacts of the capital the foreign investors has brought on the Vietnam's economy, leading the change in the growth model of Vietnam.
The case of Samsung group is an good example for this. After signing a Memorandum of Understanding on cooperation in investment and infrastructure development between the Ministry of Planning and Investment and the Samsung Construction and Trading Company, the Samsung Electro-Mechanics officially received the investment certificate for the project of manufacturing the electronic circuits and components for mobile phones in the high tech complex of the Samsung Electronics Thai Nguyen and the project is totally invested at US$1.2 billion. Thus, the total foreign investment capital of Samsung Group, regardless of the Samsung Vina Factory which specializes in producing televisions in Ho Chi Minh City, is up to US$5.7 billion.
According to Mr Nguyen Mai, Chairman of the Vietnam Association of Foreign Invested Enterprises, it is neither the big investment in the project nor the rapid growth of the leading electronic corporation in the world, but the future core values the second Samsung mobile phone factory in Thai Nguyen, to be operated in March 2014, which will benefit Vietnam. The factory of Samsung Vietnam is expected to supply about 250 million mobile phones globally. If Samsung Group retains its mobile sales of about 400 million units per year, it means that Vietnam alone produces about 60 percent of the total number of mobile phones of the world's largest phone manufacturer. At that time, Vietnam will be the mobile phone manufacturing centre of the world phone, which has never happened before. This is a very significant shift of the FDI inflows in 2013, not to mention that this investment has helped create the supporting industry for the electronics field and gain opportunities for the Vietnamese businesses to participate in the global value chains of large corporations.
The Nghi Son Refinery project is also another typical example of the positive shift of the “quality” of FDI inflows, which are strongly recovering in Vietnam.
The Nghi Son Refinery Project has been invested at US$9 billion, which is in the second project in the refinery field. If the Dung Quat Refinery project mainly focuses on the refinery, the Nghi Son project focuses on both refinery and petrochemical processes. The project, once operated in 2017, will be an important contributor to Vietnam in the process of self-producing and self-supplying the oil refinery products to ensure the energy supplies. This contributes to the energy security of Vietnam, meaning that Vietnam will avoid spending a huge amount of foreign currency importing petroleum products, which helps positively to balance trade.
High-quality and high-tech projects in priority
In the context that Vietnam is entering a new era with strategic objectives of basically becoming an industrialised country by 2020, a new orientation of attracting FDI is prioritised as a must. And one of the leading directions is to make a big change from quantity into quality in attracting FDI. Accordingly, environmentally friendly, high-tech and high quality projects are in line with the economic restructuring scheme of each locality and each industry of the country.
However, the facts show that because of losing the advantages of labour resources and preferential policies, Vietnam is losing its advantage to attract FDI compared to other neighbouring countries such as Thailand and Indonesia. According to Mr Bui Quang Vinh, Minister of Planning and Investment, Vietnam is under pressure for how to choose the right investment projects with high-tech, high added values and less environmental pollution. This becomes more and more difficult. Meanwhile, the incomplete infrastructure of Vietnam and slow administration restructuring make the investment environment of Vietnam less luring.
According to Mr Nguyen Van Trung, Deputy Minister of Planning and Investment, Resolution 103 of the Government has set out several important measures to strengthen and enhance the attraction and effectiveness of the foreign direct investment. The resolution focuses on the solutions such as continuous improvement of the legal framework for investment, revised investment incentive policies, adjustment and additional provisions of the policy mechanisms to encourage private domestic and foreign investors to invest in the infrastructure sector, completely restructured mechanisms and policies to attract foreign investment into the supporting industries, fully improved mechanisms and policies to call for suitable high technology investment projects to Vietnam, finalised regulations to guide and control the environment, the effectiveness improvement of the management of foreign exchange and credit, and accomplished rules on land and housing.
Besides, in the coming time, Vietnam will focus on promoting small and medium scale projects appropriate for each economic sector and each locality; encouraging, facilitating and strengthening the links between the domestic and foreign enterprises; planning to attract foreign investment projects by industry, sector and partners to take full advantages of each locality and industry; and ensuring the total national benefits as well as restructuring the economy under a new growth model. VCCI
Mr Lorenzo Angeloni, Italian Ambassador to Vietnam
Both the Government and businesses of Italy have paid an increasing attention to Vietnam in recent years and are trying to promote the presence of Italian key, traditional products in the potential market. Over the last three years, many State-level and B2B agreements between the two countries have been signed and many trade missions to Vietnam have been organized to help Italian companies find business cooperation opportunities with Vietnamese partners, especially in the fields of garments and textiles, footwear, wine, furniture, machinery and others.
Ms Camilla Mellander, Swedish Ambassador to Vietnam
Many Swedish investors have hesitated to invest in Vietnam because they need to see the transparency of Vietnam's investment environment. Sweden and international donors have been actively involved in activities and events in fighting corruption in Vietnam in order to partly improve the investment environment. The role of media in fighting corruption needs to be strengthened.