FDI flow turns to processing, manufacturing

News - Foreign direct investment (FDI) in the first eight months of this year has seen changes with about 57 percent of the total registered capital of 11.5 billion USD focused on processing and manufacturing technology and production.

The processing and manufacturing technology sectors are magnets for foreign investors, with total registered capital of about 3.7 billion USD for 265 newly-licensed projects and 102 expanded others in the first eight months of 2010, after a standstill during the 2006-2009 period.

Noteworthy are large-scale projects such as the Hai Duong thermal electricity plant with registered capital of 1.6 billion USD by Malaysia’s Jacks Resources, the Quang Ninh thermal electricity plant capitalised at 2.1 billion USD by the AES-TKV Mong Duong Electricity Co. Ltd, the 1 billion USD Vietnam Kobelco Steel Company in Nghe An province, and the 360 million USD Posco SS-Vina Company in Ba Ria-Vung Tau province.

The positive change is the biggest difference in FDI structure compared with the same period last year. According to the Ministry of Planning and Investment’s Foreign Investment Agency (FIA), FDI in accommodation services accounted for nearly 45 percent of the total registered capital of 13 billion USD in the first eight months of 2009, and the proportion was reduced to 23 percent in the comparable period of 2010.

The change of FDI flow in Vietnam is attributed to global and domestic economic recovery and the government’s macro-economic management policy, experts said.

However, the change has not helped reduce the country’s trade deficit, excluding exports of crude oil.

According to FIA statistics, although January-August exports from the FDI area rose, its trade deficit reached 1.7 billion USD, accounting for 19.7 percent of the country’s total trade deficit.

The country’s FDI attraction policy needs to consider both the target for development of for-export production and the competitiveness of domestic investment flow, according to James Riedels, economist of the USAID/STAR-Vietnam Technical Assistance Project.