Experts
feel employment generation will take a huge hit.
The weakening foreign
investment influx is a matter for serious concern as it could hurt economic
growth and constrain employment opportunities, experts say.
Official statistics show
that pledged foreign direct investment into the country declined 28 percent in
the first seven months from a year earlier. Only 504 new projects were
registered during the period, down 34 percent.
Committed investment for
each project has also fallen, with the largest projects having a capital of
around US$1 billion, a sharp contrast from previous years when Vietnam
attracted many $4-5 billion mega-projects, although these were mostly in real
estate and not production.
FDI is one of the
country’s major sources of foreign currency, together with export revenues and
overseas remittances. It accounts for around 25 percent of the capital that the
economy needs.
Now that the inflow is
weakening, experts fear the economy and employment will be badly affected. The
FDI sector employs around two million workers and creates jobs for millions of
others indirectly.
Phan Huu Thang, former
director of the Foreign Investment Agency, said global economic difficulties
have hindered investment into Vietnam. Even major partners like the US, Japan
and South Korea have cut back on investment here, he said.
Considering the
situation of other economies, it’s inevitable that foreign investment would
decline, Thang said.
The European Chamber of
Commerce in Vietnam said in a report last month that there is a “wait and see”
attitude toward investment plans. Its Business Climate Index survey for the
third quarter found that while 52 percent of European companies in Vietnam
still want to increase their investment, 45 percent are looking to just
maintain or even reduce their investment in the country.
The situation is the
same with other emerging Asian markets. The Asian Development Bank said last
week that capital inflows to the region are moderating as investors’ risk
appetite recedes. The European debt crisis elevated the uncertainty in the
global financial market, likely contributing to this trend, the bank said.
Economist Pham Chi Lan
said amid falling capital inflows Vietnam should change its strategy and focus
on attracting high-quality projects instead of trying to lure as much capital
as possible.
Lan, a former government
advisor, has been constantly calling for measures to cool down excessive
investment in real estate. She said what the country really needs is more
industrial and hi-tech projects. Real estate projects
only accounted for 3 percent of total foreign investment from January to July,
a sharp fall form 23 percent in the same period last year. Meanwhile, the
capital for industrial projects surged from 29 percent to 47 percent.
Several hi-tech projects
have been announced this year, including a $1-billion solar panel factory in Ho
Chi Minh City and Wintek’s touch panel plant in the northern province of Bac
Giang.
Samsung also said it has
been approved to increase the capital of its production complex in Bac Ninh to
$1.5 billion from $670 million. The expansion will allow the company to boost
its exports from $3 billion to $16 billion in 2015.
Nguyen Mai, chairman of
Vietnam’s Association of Foreign Invested Enterprises, said the trend toward
hi-tech projects is positive, but noted that it’s more a coincidence than a
result of any policy shift. Policy makers should
start focusing on attracting investment in technology, healthcare and
infrastructure, he said.
Mai added that Vietnam
has received investment from multinational corporations such as IBM, Intel and
Canon. However, the number of world’s top companies present here is still low
compared to neighbors like Thailand, Indonesia and Malaysia, he said.
Vietnam targets FDI of
$11 billion to $11.5 billion this year, about the same as in 2010. New pledges
are expected to rise 16 percent to $20 billion.
By Tran Tam, Thanh Nien News
Business & Investment Opportunities
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