FDI helps anchor Vietnam’s economy in a storm

Oct 3, 2011. Foreign investors last month disbursed $ 950 million in Vietnam, raising total net foreign direct investment (FDI) from January to September to $ 8.2 billion, up 2 per cent year-on-year.

FDI does not spark inflation due to its high economic efficiency. In a recent report, the Asian Development Bank pointed out that while state-owned enterprises’ return on equity hang around 14 per cent, foreign invested enterprises (FIEs) recorded a ratio of 22 per cent.

In June and July, net FDI slightly declined 1.9 and 1.6 per cent on-year. It started to rebound in August 2011.

Though the newly committed FDI from January to September slid 28 per cent year-on-year to $ 9.9 billion, FDI disbursement could reach $ 11 billion by the year’s end.

The forecast was pinned to commitments of investors like Panasonic Corporation, AES Corporation, Posco Power, Jaks Resource and First Solar becoming a reality.

Given the government is cutting and delaying nearly $ 4 billion in public investment including investments by state-owned companies to rein in inflation, which hit 22.42 per cent on-year in September, analysts have said FDI disbursement is a driving force for economic growth.

The General Statistics Office reported that the economy grew at 5.76 per cent in the first nine months of this year against 6.52 per cent a year earlier. This year’s economic growth is targeted at 6 per cent to ensure jobs and social welfare.

Vu Dinh Anh, an economist at the Institute for Market and Prices, said this target would not be reached if FDI disbursement slowed down.
“Overall, foreign investors are still confident in Vietnam’s long term prospects and will continue investing here,” said Anh.

Anh said increased FDI disbursement would not spark inflation due to its high economic efficiency. In a recent report, the Asian Development Bank pointed out that while state-owned enterprises’ return on equity hang around 14 per cent, foreign invested enterprises (FIEs) recorded a ratio of 22 per cent.

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