FDI growth expected to continue

Monday, Sep 29, 2014 09:00

Samsung, Intel and Nokia have continued to invest billions of US dollars in expanding production in Viet Nam.— Photo baogialai

HCM CITY (Biz Hub) — Foreign direct investment has significantly increased in recent years and will continue in the years ahead, especially as more State-owned enterprises are equitised, according to analysts.

Although Viet Nam has not had rapid growth in recent years, the country is still considered a good place for foreign investors because of its expected medium- and long-term economic growth.

For the first half of the year, the footwear industry, for example, received many major orders from global companies like Nike and Adidas, both of which plan to open factories in Viet Nam.

In addition, Samsung, Intel and Nokia have continued to invest billions of US dollars in expanding production in Viet Nam.

In July, the Samsung Display US$1 billion-project to produce high-definition screens in Yen Phong Industrial Park, in the northern province of Bac Ninh, received a license to operate.

Intel also announced a new product, the CPU Haswell chipset, of which 80 per cent will be produced in Viet Nam.

Indirect investment has also gone up, especially for mergers and acquisitions (M&A). The total value for M&A has risen five times, from $1 billion in 2008 to $5 billion in 2013.

Economic experts believe that within the next five years, there will be $20 billion worth of M&A deals.

According to the Ministry of Planning and Investment's statistics, FDI accounts for 25 per cent of total investment capital, contributing 19 per cent of GDP, 67 per cent of export revenue, and over 14 per cent of revenue of the State budget.

For indirect investment, 17,000 banking accounts of foreign investors have opened in Viet Nam. Many global investment funds have invested in the Viet Nam Stock Exchange and become strategic shareholders for local enterprises.

Lifting barriers

"The Vietnamese capital market environment has significantly improved thanks to re-stabilisation of the macro-economy," Andy Ho, VinaCapital's general director and head of Investment, was quoted as saying in the Sai Gon Giai Phong (Liberated Sai Gon) newspaper.

Viet Nam would continue to attract FDI, he said, because foreign-invested firms contributed 60 per cent of total export revenue and foreign investors were now allowed to increase their capital from 49 to 60 per cent in listed companies.

The Trans-Pacific Partnership and Free Trade Agreement with the EU will also help FDI, as well as continued equitisation.

Hindrances to development include existing capital barriers, the weak operation of big State-owned corporations; a shortage of quality human resources; increasing salaries for workers; high volume of bad debts in the banking system; and limited capital of enterprises.

Increasing enterprises' governance ability and improving transparency would be necessary for further growth, he said. —VNS

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