Macroeconomic instability causes FDI to shrink by one-half

HANOI, Jul 15, 2011. International development partners are urging the Government to settle down the macroeconomic chaos in order to put the country back to the radar screen of foreign investors as uncertainties have caused foreign investment to fall.

Japan is the pioneer to do so. For the first time ever, the joint committee of the Vietnam-Japan joint initiative phase 4 has defined macroeconomic stability as the major condition for the country to improve the business environment.

“Vietnam dong has been continuously weakening for the past three years… Only Vietnam dong has devalued while the neighboring nations’ currencies have all strengthened against the U.S. dollar,” the joint committee said in a document issued on July 1.

The European Union announced it was mulling a plan to give Vietnam a grant of 150 million euros, or US$ 212 million, to support poverty reduction and the health sector in the next two years. However, the EU delegation said such financial support would only be possible if macroeconomic stability is maintained.

These warnings show the increasing uneasiness of the international community over the country’s economic situation. Such warnings also show development partners cannot wait until Consultative Group Meetings and the Vietnam Business Forum to table their requests to the Government.

According to MPI, newly-registered FDI in the year’s first half was around US$ 4 billion, or just one half of that in the same period last year. Meanwhile, disbursed FDI was US$ 5.3 billion, also lower year on year.

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