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Vietnam’s investment planners are forecasting a massive surge in the foreign direct investment capital on the back of the country’s recent diplomatic successes. According to a survey conducted by the Asian Business Council, Vietnam ranked third for investment attraction among Asian nations in the 2007-2009 period, after China and India. (VIR, No. 837, 29.10.2007)

BMI View on FDI Attractiveness of Vietnam in year 2011

BMI View: South East Asian countries saw a significant rebound in foreign direct investment (FDI) inflows in 2010 and we expect a robust recovery to continue into 2011. In line with our view that Indonesia and Vietnam's economic growth would outperform the region in 2011 due to favourable demographics and robust domestic demand, we see the two countries as the top favourites for foreign investors. On the other hand, continued risk aversion is likely to put a damper on FDI inflows into Cambodia, Myanmar and Laos.

The post-crisis recovery in FDI inflows into South East Asian economies is expected to continue as macroeconomic conditions remain on a relatively more stable footing than its western counterparts going into 2011. From a regional perspective focusing on countries within the Association of Southeast Asian Nations (ASEAN), we favour Indonesia and Vietnam as top favourites in terms of attracting FDI in the coming years.

Global FDI flows witnessed a 47.1% decline from US$2.10trn in 2007 to US$1.11trn in 2009 as Transnational Corporations (TNC) delayed investment plans during the course of the global financial crisis. The rush to strengthen balance sheets at the onset of the crisis coupled with the scarcity of credit, led to delays in investment projects and a slowdown in mergers and acquisitions. We believe these factors were the key reasons behind a global decline in FDI flows. We are beginning to see an encouraging rebound in FDI inflows into ASEAN in 2010, suggesting that investor sentiment in the region is improving. As investor sentiment continues to improve in line with better-than-expected economic growth across ASEAN countries, we expect a robust recovery in FDI in 2011 and 2012.

Indonesia And Vietnam Seen As Top Favourites Among TNCs

Judging from FDI inflows into ASEAN countries since the beginning of the year, we expect inflows into Vietnam, Indonesia and Singapore in 2010 to surpass levels back in 2008 by a considerable margin. Indeed, latest official estimates by government agencies suggest FDI inflows for Indonesia, Vietnam and Singapore could increase by 174%, 140% and 120%, respectively. Although we expect growth rates for FDI inflows in 2011 to come in at a more moderate pace, the inflow of FDI in these economies will nonetheless remain robust.

According to a report published by the United Nations Conference on Trade and Development (UNCTAD), TNCs see Vietnam and Indonesia as favoured destinations for FDI in the South East Asia region in 2011 and 2012. This is in line with our view that Indonesia and Vietnam will outperform the region in terms of economic growth. Singapore remains an attractive option for foreign investors due mainly to its advantage in infrastructure, technology and geographical location in the region ( see chart). However, we note that the country remains heavily exposed to external demand from the US and EU. Given that economic conditions in the US and EU remain uncertain, we believe TNCs will favour countries with superior demographics and strong domestic demand over export-orientated economies in the region.

The remaining ASEAN countries are also expected to see an uptick in FDI inflows in 2010, albeit at a slower pace. In the case of Thailand, although economic data in recent months suggests that domestic demand and exports remain robust, we are maintaining a cautious stance on the country's outlook for business investments due to political risks. Thailand is expected hold general elections in early 2011 and we expect businesses to delay investment plans until there are more evidence that another round of political unrest can be avoided. Following a severe 81% decline in FDI inflows into Malaysia from US$7.3bn in 2008 to US$1.4bn in 2009, the country is expected to see a 357% increase to US$6.4bn in 2010. Despite the rebound, Malaysia's FDI inflows remain below the US$7.3bn level last seen in 2008. From our perspective, such extreme volatility in FDI inflows highlights the vulnerability of the Malaysian economy towards risk aversion among foreign investors during periods of uncertainty. However, we acknowledge that Malaysia's recently announced 10-year Economic Transformation Program (ETP) could help boost the country's attractiveness to foreign investors in the coming years.

LDCs To Underperform In A Challenging Economic Environment In 2011

We expect Cambodia, Myanmar and Laos - classified as Least Developed Countries (LDC) by the United Nations - to underperform the region in terms of attracting FDI inflows in 2011. We believe risk aversion among TNCs could remain in 2011 and this could put a damper on FDI inflows into LDCs, which have traditionally been heavily dependent on official development assistance and FDI. We expect TNCs to adopt a conservative approach and wait for further evidence of a robust economic recovery in LDCs before shifting funds into these economies. As such, we see a gradual but slow recovery for FDI inflows into Cambodia, Myanmar and Laos in 2011 and 2012.

(Source: Business Monitor Online)

FDI Mechanism in Vietnam Year 2010

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FDI in Vietnam from 1990 - 2010

FDI Vietnam 1990-2010

FDI in the first half of 2010

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FDI Outlook in Vientam in year 2009

Total new registered capital of FDI projects is about 21.48 billion USD, in which 16.34 billion USD is newly licensed project (76% contribution, 839 projects). Top 3 provinces attracts FDI in Vietnam is Baria-Vung Tau (6.73 bil. $US, in which 2.857 bil.$US of 12 new licensed projects), Quang Nam (4.174, 4.150, 1), Binh Duong (2.502, 2.152, 95). Hochiminh City and Hanoi are ranked number #7 and #8 accordingly. However, the number of license granted by those major economic hubs of Vietnam is almost 537 licenses (64% of total new licenses granted in Vietnam)

More details on Vietnam Ranking Index, as investment environment

Vietnam Ministry of Industry and Trade has expected the industrial output contribution growth of FDI segment remaining at high over 15% year on year.

Focus more news of VIETNAM INDUSTRY

Vietnam Ministry of Planning & Investment (MPI) has official set the FDI target of year 2009. Country targets to attract 30 billion$US in year 2009 (almost a half of actual in year 2008). There are some reasons explained from authorities : (1) world financial crisis (2) Other regional countries has raised up their competitiveness indexes, which could attract more FDI flow in (3) Other reasons from selft country competitivness like infrastructure conditions, amdministration process ...Vietnam's GDP growth rate in year 2009 is planned at 6.5%

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