Vietnam forecast to continue receiving big FDI this year

Thursday, 2018-08-23 11:58:12
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With its improved business climate, Vietnam continues to be a favourite location for FDI
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NDO - With its projected high growth, Vietnam is expected to see more foreign direct investment in the near future, with the specific contributions of this type of capital revealed for the first time.

Asia Briefing, a subsidiary of Dezan Shira & Associates, which provides business intelligence, due diligence, and legal, tax and advisory services throughout Vietnam and the Asian region, stated that in 2018, the government is targeting a growth of 6.7% which seems achievable based on the 2017 figures. Moreover, 2017’s record high registered foreign direct investment (FDI) is expected to lead to “a high disbursed FDI in 2018.”

Vietnam will continue to remain a priority for investors in 2018. Opportunities not only exist in the traditional sectors such as garments, footwear, and electronics but also in renewable energy projects, high-tech agriculture, and other high-tech industries, according to Asia Briefing.

“Investors will continue to find the traditional export-oriented sectors such as electronics, garments, and footwear to be attractive. In addition to the export-oriented sectors, the domestic market also provides an opportunity for investors. With growing urbanisation and rising incomes, industries such as education, real estate, retail, food & beverages, e-commerce, and FMCG will continue to grow in 2018,” said Asia Briefing. “The aforementioned industries will continue to be a priority for the government in the short term.”

In this year’s first seven months, total FDI disbursement hit US$9.85 billion, up 8.8% annually. Newly registered capital reached US$13.2 billion, up 2.2% annually.
The government has set a target of US$17.5 billion in FDI disbursement this year, equal to that recorded last year.

At the recent Vietnam Business Forum in Hanoi, chairman of Dragon Capital Group, Dominic Scriven said that Vietnam remains an attractive market for FDI.

“In the first half of this year, foreign investors withdrew US$5.6 billion from the Thai market, US$3.7 billion from the Indonesian market, and US$1.6 billion from the Philippine market but they poured US$1.5 billion in the Vietnamese market,” Scriven said. “This means foreign capital flow is still strongly pouring into Vietnam.”

According to the World Bank’s Doing Business 2018 report, Vietnam ranked 68th among 190 economies, a jump of 14 ranks against 2017 and 30 ranks against 2012. Similarly, as per the World Economic Forum’s Global Competitiveness Report 2017-2018, Vietnam ranked 55th among 137 economies, a jump of five places from the previous year.
In the recent Global Innovation Index 2017, Vietnam jumped 12 places to 47th among 127 economies, its highest ranking in the last 10 years. Vietnam also led the group of 27 lower-middle-income economies.

Big contributions

For the first time in Vietnam, the FDI’s specific contributions to the state coffers have been revealed.

The Department of Corporate Finance (DCF) under the Ministry of Finance recently published a report on foreign-invested enterprises’ (FIEs) performance for the 2012-2016 period, which was conducted a few months ago.

According to the report, FIEs’ contributions to the state budget climbed from US$3.7 billion in 2012 to US$4.94 billion in 2013, US$5.5 billion in 2014, US$6.26 billion in 2015, and US$7.18 billion in 2016 (excluding contribution from crude oil exports).

Tran Tu Quynh, Chairman of Bac Ninh People’s Committee, stated that the Republic of Korea (RoK)’s Samsung Electronics and Samsung Display, that are based in the province, have contributed multi-millions of US dollars to the provincial budget.

“In this year’s first six months, these two projects greatly helped the province earn VND480 trillion (US$21.33 billion) in production value, up 22% year-on-year, and rake in US$16.45 billion in export turnover, up 38 % on-year and 55% as compared to the plan for the whole year,” Quynh said.

According to the DCF, in 2016, Samsung Electronics and Samsung Display held 68% of total revenue of all FIEs in Bac Ninh. In another case, Samsung Electronics Thai Nguyen in Thai Nguyen province accounted for 92% of total revenue of all FIEs in this province.

The DCF report also revealed that the total revenue of all FIEs in Vietnam in 2016 touched US$154.29 billion, up 21.7% as compared to 2015.

“This revenue rise was higher than the 18.6% ascension in assets and also higher than the equity increment of 15.5%. This demonstrated the fact that FIEs’ performance has been quite convenient,” said the department’s representative Nguyen Ngoc Khanh.

According to the Ministry of Planning and Investment, as of July 20, 2018, Vietnam attracted nearly 26,214 FDI projects, registered at US$333.026 billion, with a focus placed on the sectors of manufacturing and processing (US$189.76 billion), property business (US$56.33 billion), electricity, gas and water (US$22.7 billion), and accommodation and catering (US$12.61 billion).