Viet Nam News talks with director of the Southern Foreign Investment Centre, Dr Pham Hong Ky, about foreign direct investment during 2006.

What was the FDI figure this year?

As of November 20 the Vietnamese Government has licensed 734 projects capitalised at US$6.15 billion, according to figures from the MPI’s Foreign Investment Department. The Government has also licensed further capital infusion of $2.12 billion in existing projects. The total FDI licensed so far this year is $8.3 billion.

More new projects are likely in December. I hope [these] will help take total FDI to $9 billion.

How much FDI has come in since the enactment of the Foreign Investment Law?

In the 18 years since the passing of the Foreign Investment Law, foreign investment has exceeded $59 billion. Actual disbursement has been $28.7 billion. These comprise $37.25 billion in the industrial sector, $17.95 billion in the services sector, and $3.87 billion in the agriculture, forestry, and fisheries sector.

HCM City has attracted the largest FDI inflows, followed by Ha Noi, Dong Nai, Binh Duong, Ba Ria-Vung Tau, Hai Phong, Long An, Hai Duong, Vinh Phu, Thanh Hoa, Da Nang, Quang Ngai, Quang Ninh, and Khanh Hoa.

Who were the top investors in Viet Nam this year? Which were the most attractive sectors?

South Korea is the biggest investor in 2006 with over $2 billion. It is followed by Hong Kong and Japan.

Heavy industries, especially steel manufacturing, attracted the most foreign investment, followed by hi-tech industries, garment, footwear, hospitality and tourism, housing, and office and apartment buildings.

Can you compare this year’s FDI with that of five years ago?

In 2000 the Government licensed 389 projects with an investment of nearly $2.7 billion, including the $1.3 billion gas pipeline and Nam Con Son Gas Terminal in Ba Ria-Vung Tau Province. The other projects were mostly industrial, like garment and footwear manufacturing.

What are the reasons for the jump in FDI this year?

We have seen FDI rise for the past three years – from $3.1 billion in 2003 to $5.8 billion last year.

Viet Nam, which has taken efforts to integrate with the global community and fulfilled its commitments to multilateral organisations, has been recognised as an attractive investment destination.

Its abundant human resources and low labour costs, and a big market of more than 80 million people make Viet Nam attractive to foreign investors.

Local authorities across Viet Nam have made the investment environment more attractive by developing infrastructure and launching investment promotion campaigns.

What has made the investment environment in the northern provinces more attractive in recent years?

The huge investments from ODA loans into infrastructure facilities in the Northern Key Economic Zone have helped to make the investment climate [there] more attractive. The region still has vast areas for setting up industries while most industrial zones in the south are fully taken, pushing up land rentals.

The presence of big groups like Canon in the north has helped attract support businesses to the region. Setting up shop in the northern provinces provides big companies, especially Japanese, easier access to the Chinese market.

In the past few years local authorities in the north have focused on promotional activities and making it easier for foreign investors to do business.

What are the shortcomings in Viet Nam’s investment environment?

The delay in issuing directives for the implementation of the Enterprise Law and Investment Law was one of the problems. Besides, these documents are unclear and leave both investors and local investment authorities confused.

Despite improvements, the formalities connected with investment remain complicated compared to neighbouring countries.

Land issues, including leasing, compensation, and acquisition, are still very complicated. It is a waste of time for foreign investors.

The laws for settling business disputes have not been strengthened enough to make investors feel secure while doing business in the country.