Foreign Direct Investment (FDI) is an economic
term describes an investment from foreign business. FDI brings benefits to both
two sides. In aspect of multinational companies, it is a chance for them to
expanse its market share as well as gain more profit. Governments also take
advantage for the development of the country.
Vietnam now attracts a large number of foreign
investments. It is a good chance to review the effectiveness of FDI to
Vietnam’s performance.
Due to the effectiveness of the Law on Foreign
Investment in 1987, Vietnam successfully attracted FDI inflows. At the end of
year 2004, there are 6.164 FDI projects invested in Vietnam with the total of
capital is approximately USD 59.8 billion.
According to figure provided by Ministry of
Planning and Investment (2012), in 2012, the capital pledged
for disbursement is USD 1 billion, equals 91% to the same period in 2011. Areas
attract most of investment is Seafood Processing and manufacturing industry,
increasing 994.29 million dollars, made up 80.8% total investment in the first
two months of the year.
By February, 2012, FDI in Vietnam comes from 23
nations around the world. Japan is leading with USD 1.07 billion- 87.5%
proportion of the investment. Taiwan is at the second position with 30.9
million USD.
FDI attraction now becomes a new trend in
Vietnam. But, is it good or bad? What benefits does FDI actually bring to
Vietnam?
Generally, according to a research by Nguyen
Mai (2003), he affirmed the good effect of FDI on economic growth at national
level. FDI companies contributed 13.3% to GDP, 35% to the industrial output,
23% to export, 25% to total state budget revenue He suggested Vietnam should
continue expanding the market and seeking more new partners.
Alfaro (2003) pointed out that FDI has
positive effect on the productivity in manufacturing industries, whereas its
effects on growth of agricultural and mining sectors are negative. As mentioned
above, vast of investment is for Seafood Processing and manufacturing industry,
therefore, organizations can take all benefits from their activities.
In my opinion, FDI also brings chance for the
development of infrastructure as more 67 industrial zones had built in 2002 in
order to provide appropriate infrastructure for investors. FDI also spans a
range of other non- financial attributes such as the new technological innovation,
jobs for employees, improvement in skills and designs…
However, FDI in Vietnam has one drawback,
which is the weakness in Vietnam’s FDI policy regimes. The idea is supported by
the author Freeman (2002) as he stated that importance of effective policy as
it “reform and trade liberalization positively affect the business environment
for the investors”. He also recommended Vietnam to strengthen the co-
ordination and improvement.
In fact, it can not be denied the potentiality
of Vietnam in FDI area. A recent report by Citygroup on the Wall Street Journal
affirms the potentiality of Vietnam in 2012 although Vietnam’s market was
suffered by the global crisis in 2008. City groups as well give a judgment a
decreasing in Vietnam’s inflection below 9%, compared with 23% in the last
year. The organization suggested investors to have a long- term view about the
potentiality of Vietnam, with the development of society, as well as an
improvement in Vietnam policies such as the reducing in procedures to foreign
investors (Bao Linh, 2012). The Chief
Operating Officer of the European External Action Service David O’Sullivan also
confirms that there is no change in vestment from EU to Vietnam (Thanh Thu,
2012).
http://vef.vn/2012-02-24-citigroup-da-den-luc-dau-tu-vao-viet-nam-
http://www.thesaigontimes.vn/Home/kinhdoanh/giaothuong/72417/Von-dau-tu-tu-EU-vao-Viet-Nam-du-bao-khong-bi-anh-huong.html
You said that FDI in Vietnam has one disadvantge which is Vietnam's FDI policies.I wonder that what those policies are how they impact foriegn investors?
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