Disbursement of FDI slows down

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Disbursement of FDI slows down

Disbursement of FDI slows downOnly 35.6% of registered foreign direct investment (FDI) has been disbursed in Vietnam, according to speakers at a seminar held in Da Nang last Friday.

The effects of the global economic downturn and cumbersome land-use certification procedures had largely caused the slow implementation of FDI projects, they agreed.

The country has drawn almost $13 billion in FDI this year, of which nearly $10 billion was newly registered. That increased total FDI inflow to over $216 billion.

By the end of last year, only $77 billion had been disbursed, according to the Vietnam Association of Foreign Invested Enterprises (VAFIE), which hosted the seminar.

Of the FDI capital yet to be disbursed, only 50% would be allocated by 2017, according to VAFIE President Nguyen Mai.

Investors affected by the global crisis were expected to cancel or change their plans due to a lack of capital, but there were a lack of legal regulations to cope with the problem, he said.

“The causes of tardy implementation of FDI projects, besides such objective facts as the global economic turmoil and unfavourable market, capital and credit conditions, include shortcomings of domestic governmental authorities,” added Mai.

There is about $20-30 billion of newly registered FDI each year.

FDI allocation occurred more quickly from 2008 to 2010, with around $11 billion disbursed each year. The average annual amount over the past five years has been around $10 billion, according to VAFIE.

FDI capital presented about 25% of the total investment capital in Vietnam, playing an important role in domestic economic development.

Every year, it contributes about 30% of gross domestic product (GDP) growth, 40% of industrial production value, 55% of export turnover and 18% of State budget revenue.

The sector’s export value accounts for 55% of the country’s export revenue.

Experts said measures should be taken to help allocate the remaining registered FDI as soon as possible to further boost the effects of foreign investment.

Mai said the association was co-operating with the Ministry of Planning and Investment to revise the legal framework for FDI, with adjustments expected to be submitted to the Government for consideration in the second quarter of next year.

New policies for FDI would be based on four main criteria: high quality and efficiency, sustainable development, suitable technology transfer, and skilful labour. These were in accordance with United Nation directions as well as the Government’s strategy, he noted.

In addition to creating a smoother investment environment for investors, authorities should be a stricter in the selection of policy for investors and take more drastic measures to tackle companies that polluted the environment and evaded taxes, the participants heard.

Le Tuyen Cu, an official from the Ministry of Planning and Investment, suggested that conditions in industrial and economic zones, including tax policies, master plans, infrastructure and human resources, should be improved to boost both attraction and disbursement of FDI.

Despite these challenges, Vietnam remains an attractive destination for foreign investors, according to the results of a VAFIE survey released at the seminar.

The majority of more than 300 surveyed FDI enterprises said they were happy with the investment environment in Vietnam, with 68% saying they had no complaints over project implementation and more than 20% greatly appreciating the support of authorities.

Despite an average annual trade deficit of nearly 20% over the past five years, the FDI sector managed to gain a trade surplus of $2.35 billion last year.

(Source: VNS)

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