FDI growth expected to continue

FDI growth expected to continue 10/10/2014 03:01:00 1126

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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 Vietnam 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 Vietnam.

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

In July, the Samsung Display one-billion-USD-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 percent will be produced in Vietnam.

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 USD in 2008 to 5 billion USD in 2013.

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

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

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

"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.

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

The Trans-Pacific Partnership (TPP) and a 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.

Source: VNA