FDI rivals turn up the heat on Vietnam

Feb 20, 2012. Vietnam is losing ground in the race to lure foreign investment with regional rivals stealing some of the country’s thunder.

Japan’s Canon, the world’s leading office equipment manufacturer, last month announced it had chosen the Philippines for the establishment of a new factory producing laser printers and accessories. Canon still manufactures printers in Vietnam, where it already has three factories, but the choice of the Philippine for its latest production expansion once again indicates Vietnam seems not Canon’s top priority for expansion. As further proof of this, in 2010, the Japanese company also built a new inkjet factory in Thailand.

On February 8 this year, Toyota Motor Corporation, announced it planned to step up annual production capacity at its under-construction Karawang No. 2 Plant in Indonesia to 120,000 vehicles from an originally planned 70,000 vehicles.

Meanwhile, British-Dutch consumer product manufacturer Unilever last year decided to invest an additional $ 112 million, also in Indonesia, to meet the increasing demand for beauty products and ice cream in this country and other parts of Asia and Africa.

Vietnam’s new FDI commitments in 2011 dropped 26 per cent against 2010 to nearly $ 14.7 billion. The country’s FDI disbursement reached the same level as in 2010, or $ 11 billion, a positive number but nevertheless slow compared to the growth of its neighbours.

In the Foreign Direct Investment Confidence Index, released by global management consulting firm A.T. Kearney, Vietnam is the only Asian nation to fall in the rankings this year, dropping from 12th in 2011 to 14th in 2012.

A.T. Kearney: Foreign Direct Investment Conficende Index

Indonesia made significant gains this year, moving from 20th to 9th place. Indonesia’s FDI inflows last year hit a record $ 19.3 billion.

Similarly, Malaysia moved up the index from 21st to 10th, and inflows jumped 537 per cent to $ 9 billion, according to A. T. Kearney.

Despite increased economic openness and relative political stability in Vietnam, the US consulting firm commented that investors might be stalling investment expansion in Vietnam because of concerns about high inflation, currency depreciation and strained public finances.

The Foreign Direct Investment Confidence Index is a regular survey of global executives conducted by A.T. Kearney. The Index provides a unique look at the present and future prospects for international investment flows. Companies participating in the survey account for more than $ 2 trillion in annual global revenue.

The prospects for near-term recovery are still shaky more than three years since the onset of the global economic crisis, and debt crises loom large. In the 2012 A.T. Kearney Foreign Direct Investment (FDI) Confidence Index®, we find that FDI flows have picked up slightly in the past two years as investors cautiously reenter the markets. However, this modest optimism could quickly revert to retrenchment as investors weigh potential upside opportunities against downside risks.

The 2012 A.T. Kearney FDI Confidence Index examines future prospects for FDI flows as the world seeks to recover from the global recession and continued economic uncertainty in Europe and the United States. The Index, which first appeared in 1998, assesses the impact of political, economic, and regulatory changes on the FDI intentions and preferences of the leaders of top companies around the world.

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Vietnam Investment Review

Summary • A.T. Kearney: Foreign Direct Investment Confidence Index

Full Report • A.T. Kearney: Foreign Direct Investment Confidence Index – download pdf, iPad, or Kindle versions