Will FDI boom in 2019?

	FDI 2018: Going to new generation
	FDI attraction in 2018 achieved nearly $US 35.5 billion, a decrease compared to 2017
	Removing PPP bottlenecks to attract FDI into infrastructure

Vietnam is determined to achieve sustainable economic development and prioritize attracting high-tech projects that cause less environmental pollution. Photo: S.T

Different movements

With quite different developments, the FDI capital into Vietnam in 2018 did not follow the familiar trend of previous years. While the newly registered capital in 2018 had a month-on-month rise and fall then closed at a decline compared to the last year, the disbursed capital was the bright spot of the FDI in the past year. According to the data from the Foreign Investment Agency (MPI), the total newly registered capital, increased and contributed capital for buying shares by foreign investors in 2018 reached 35.46 billion USD, down 1.2% compared to 2017; in the opposite direction, the disbursed capital reached a record number of 19.1 billion USD, up 9.1% over the same period.

From these two figures, Mr. Nguyen Viet Phong, Director of the Construction and Investment Capital Statistics Department (General Statistics Office, Ministry of Planning and Investment) said: The bright spot of the FDI sector in 2018 was that it had set a new peak in disbursement, reaching 19.1 billion USD, although the newly registered capital had decreased. Besides, the disbursed capital has increased; the registered capital has decreased, indicating that the Government has determined to achieve sustainable economic development and prioritized attraction for high-tech projects, causing less environmental pollution. The government has not attracted projects at all costs as it did before.

Sharing about this issue, Mr. Le Duy Thanh, Vice Chairman of Vinh Phuc People's Committee, said that FDI capital played a very important role for socio-economic development of the province, however, it has not attracted at all costs. The province's policies and strategies to attract investment were very clear. The province was willing to reject projects that were not in the industrial development plan and were high-risk ones, although the prospect of budget revenue from projects was not small. “In 2018, Vinh Phuc said no to a project with an investment of over 400 million USD because the investor could not prove the ability to ensure absolutely environmental risks, although it could bring high benefits for economic development,” said Mr. Le Duy Thanh.

In 2019, according to experts and the business community, attracting FDI into Vietnam will have many positive expectations. One of the contexts for this expectation is that the trade war between the United States and China is increasingly complicated. Sharing about this, Mr. Michael Kelly, Chairman of the American Chamber of Commerce in Vietnam (AmCham) said that the ongoing tension in trade between the US and China had highlighted the risks of centralized manufacturing facilities in a single country and was activating supply chain reorganization.

A recent survey by AmCham to US businesses in China showed that one-third have moved or are considering moving some of their production facilities abroad in the context of trading tensions. “We see that companies and suppliers have moved some of their manufacturing activities out of China and Vietnam is benefiting from some of them. The question is how can Vietnam make full use of this opportunity to continuously maintain its rapid economic growth rate,” Mr. Michael Kelly recommended, and at the same time, emphasized that as a major investor in Vietnam, US companies are very interested in the continued success of this market.

Expect an explosion

Commenting on Vietnam's opportunities in 2019 related to the US-China trade war, Mr. Thach Thuy Ky, Representative of Taipei Economic and Cultural Office in Vietnam said that Taiwan's FDI capital would continue to increase sharply in 2019 and the coming years when Taiwanese businesses accelerated the move of their capital out of China to avoid the effects of the US-China trading tensions. Of the 47,000 projects operating in China, many project owners intend to move their investments out. Vietnam is one of the investment locations that are considered.

According to Mr. Thach Thuy Ky, Vietnam's advantages that are favored by Taiwanese enterprises are a source of cheap and abundant labor, and strong integration with a series of the FTAs. The data from the Ministry of Planning and Investment (MPI) showed that Taiwan currently ranks 4th out of 130 countries and territories investing in Vietnam over the past 30 years. Currently, Taiwan has nearly 2,600 FDI projects in Vietnam with the total investment of about 31.44 billion USD.

Vietnam urged to focus more on dynamic advantages to attract FDI

Affirming that FDI will gradually increase, however, with another perspective, the expert, Associate Professor Dinh Trong Thinh said that the opportunity from the US-China trade war was only an impact, but it would not be clear. The reason, according to Associate Professor, Dr. Dinh Trong Thinh, is that it is not simple to withdraw the operation of a certain company from one market to another like withdrawing indirect investment on the stock market, because it includes factories, labor force, technological lines, machinery and logistic systems to follow the production of FDI enterprises. Therefore, when the project is withdrawn, it will cause enterprises to suffer huge losses. However, according to this expert, there is another movement trend, which is some investors from some countries who previously produced in China, are now willing to invest in Vietnam to reduce production investment and export from China, or they want to invest in production in Vietnam to export to China… Having the same opinion with this statement, Mr. Thach Thuy Ky also said that the process of moving a factory out of China would take time. Therefore, in the short term, Taiwanese enterprises will boost orders to Taiwanese enterprises in other markets, including Vietnam. Thus, more Taiwanese projects will be expanded in Vietnam.