Electronics components are produced at a foreign-invested company in HCM City. The volume of foreign direct investment (FDI) registered for Viet Nam has exceeded the year's target, but the country's FDI mobilisation still faces many problems ahead. — VNA/VNS Photo Thanh Vu

The volume of foreign direct investment (FDI) registered for Viet Nam has exceeded the year's target, but the country's FDI mobilisation still faces many problems ahead.

Early this year, the Ministry of Planning and Investment (MPI) estimated this year's registered FDI capital to be US$13-14 billion, compared to the $13.01 billion of last year.

However, figures released by MPI's Foreign Investment Agency revealed that FDI poured into Viet Nam from between January 1 and August 20 amounted to $12.63 billion, a year-on-year increase of 19.5 per cent.

According to the Thoi Bao Kinh Te Sai Gon (Saigon Economic Times) news magazine, newly licensed FDI projects across the country have brought total registered FDI capital to over $14.4 billion, higher than the year's target set by the ministry.

In addition, new projects licensed in other provinces in September have yet to be included.

There are still more than three months to go and FDI is forecast to increase more strongly, meaning the year's total FDI amount will be much higher than the target.

Despite high FDI mobilisation so far, the domestic investment environment is not as competitive as countries in the region.

MPI Minister Bui Quang Vinh has said that Viet Nam was becoming more selective about FDI as the country now prefers to have environmentally friendly projects with high technology and high added value.

Attracting FDI has become more problematic as infrastructure in Viet Nam is still not good enough and administrative procedures have not improved much, according to Vinh.

Shrimp competition

Chinese traders are buying up much of the raw materials used by Vietnamese shrimp processors at higher prices than the processors can afford, according to industry insiders.

The Viet Nam Association of Seafood Exporters and Processors (VASEP) says that each day Chinese traders buy hundreds of tonnes of Vietnamese shrimp from Ca Mau, Bac Lieu, Soc Trang and Kien Giang provinces in the Mekong Delta and Phu Yen in central Viet Nam.

VASEP said the Chinese traders' direct purchase of large volumes of Vietnamese shrimp would pose a risk for Viet Nam's shrimp processing industry.

To purchase local shrimp, Chinese traders have offered prices 15to 20 per cent higher than those set by Vietnamese buyers, said VASEP Chairman Nguyen Thuong Hai.

"Vietnamese seafood processing enterprises will lose customers as their processing lines will face material shortages, leading to fewer employment opportunities and falling salaries for local workers and the possible loss of prestige of the Vietnamese shrimp brand," Hai said in a statement released by VASEP last week.

In early September, 10 Chinese traders visited the central province of Phu Yen to buy shrimp and take it to Lang Son before exporting it to China. Shrimp were being bought at VND10,000 ($0.47) per kilo higher than the prices set by local buyers.

Huynh Thi Nam, director of the private firm Nam Rum in Phu Yen Province, said Chinese traders had caused the price of 12.5g shrimp to rise from VND100,000-120,000 ($4.76-5.71) per kilo in August to VND150,000 ($7.14) per kilo recently.

The higher prices have helped Chinese traders purchase most of the shrimp from Nam Rum, which had previously sold it to local buyers from Da Nang. She added that most of the Chinese traders were not licensed to do business in Viet Nam.

Over the past several years, the managers of the shrimp-processing company Ba Hai Co Ltd thought they would never face material shortages.

However, the company now faces a situation in which it would have to break contracts signed with foreign partners.

The company is based in Phu Yen Province, which has more than 2,500ha of shrimp-breeding ponds.

"As they have paid no tax, Chinese traders have purchased local shrimp at sky-high prices. Local businesses will suffer big losses if they buy shrimp at the same prices [offered by Chinese traders]," said Le Van Hong, director of Ba Hai Co Ltd.

To save the company, Ba Hai has had to sign contracts to sell frozen shrimp to Chinese traders.

Chinese traders had even been visiting factories in the Mekong Delta to have local enterprises seek supplies for them, said Nguyen Van Kich, general director of the Hau Giang-based Cafatex Corporation.

Chu Van An, deputy general director of Minh Phu Seafood Corp in Ca Mau Province, said his firm faced serious material shortages due to the harsh competition from Chinese traders.

"Several contracts for export to Japan and the US have been signed, but local enterprises do not have shrimp to process and deliver to buyers. My company has received many orders for export to Japan, but can hardly find material supply. Chinese traders have bought it all, big shrimp, small shrimp, everything," said Kich.

The strong purchasing power of Chinese traders greatly affected the local shrimp-processing industry, said An.

"If workers lose their jobs, our potential markets like the US, Japan and South Korea will likely switch to other suppliers. Decent shrimp traders will suffer severely," he added.

Truong Dinh Hoe, general secretary of VASEP, said such a situation would affect Viet Nam's shrimp exports because the shortages of shrimp materials would lead to a loss of contracts with foreign buyers at local companies.

Meanwhile, the rising export of shrimp as raw materials would make the added value of Vietnamese shrimp fall, affecting the local shrimp processing firms who have invested in staff and advanced technologies, he said.

According to VASEP, 50g tiger prawn is priced at VND240,000-245,000 per kilo and 35g prawn VND150,000-155,000 per kilo, while over 66g tiger prawn sells for VND310,000-320,000 per kg in Ca Mau, a two-year high.

In 2012, Viet Nam exported over US$193 million worth of shrimp to China, accounting for 8.6 per cent of the total shrimp export turnover. — VNS