There are anecdotes about Long An Province in the Mekong Delta rejecting a dozen golf projects due to limited space for eager investors, or about the huge amount of foreign direct investment pouring into Central Vietnam this year, at US$3.3bil, nearly equivalent to the combined FDI flow into the region in 18 previous years.

Huge projects come in, one after another, and the majority of them are capital-intensive ones. Billion-dollar projects are no longer scarce, as earnest investors after some time testing the water now understand the playground is there for them.

Says Song Pil Woo, a consul at the Korean Consulate General in HCMC: “The number of Korean investors seeking information and assistance from the Consulate to do business here is increasing so quickly, and we cannot meet their demand.”

Impressive facts and figures

The registered FDI this year amounts to the all-time high of US$20.3bil, says the Ministry of Planning and Investment (MPI). That represents a 68% increase on 2006, when the FDI inflow was itself also a record of US$12bil.

The indirect investment, mainly via official development assistance (ODA) and portfolio investment, also surges to new highs of US$5.4bil and US$5.3bil respectively, while the country’s foreign reserve leaps to US$20bil. Export leaps 21.5% year-on-year to US$48.4bil, which is more than 3% higher than the year’s target set by the Government.

Such high growth rates in incoming sources have spurred the overall gross domestic product rate to 8.44%, which is the highest rate in the past ten years. The GDP per capita has also increased to US$835, and is poised to grow to some US$960 in 2008 to help lift the country out of the list of low-income developing economies.

In fact, all such positive growth indicators have been predicted beforehand, as experts have pointed out that foreign investors no longer fret about the legal corridors as Vietnam has committed to adjust its law system to the common rule of the world.

Le Dang Doanh, a high-profile economist, says in an article on Thoi Bao Kinh Te Sai Gon that “beyond the facts and figures above are the trust and expectations of local and foreign investors.”

Many important projects for the future have been discussed, and the Vietnamese economy now has the golden opportunity to accelerate growth in its drive of industrialization.

Phan Huu Thang, gead of the MPI’s Foreign Investment Department, says that the country’s accession to WTO and commitments to legal changes have instilled confidence in foreign investors.

Wide market

As trade barriers are going down, the local market has seen an influx of imported commodities, whose prices have become cheaper for local consumers. The local market has become one of the most promising venue for international retailers.

The overall retail sales of goods and services in the country this year are estimated to grow by more than 20% from last year to some VND700 trillion, or some US$44 billion.

During the year, many well-known traders like Parkson and Metro Cash&Carry have managed to open more facilities to secure their foothold, while local players have also clubbed together in consortiums or alliances to gear up for the competition.

With the potential market, foreign retail giants are preparing themselves for full participation, which will be made possibel in January 2009 when all barriers are removed under WTO commitment. Big names in the waiting list include Tesco, Wal-Mart and Carrefour.

Awkward handling

The most worrisome impact on the economy this year is obviously the high inflation, which tops 12.63% on one year earlier. The poor including farmers as well as those on the payroll see their real incomes shrink considerably due to higher prices.

After years of improving living conditions, 2007 is really a difficult year for low-income people. Inflation coupled with numerous natural calamities have pushed many people back to or under the poverty line, and this is a problem to be addressed in the growth policy for the years to come. While increasing prices on the global market are seen the main factor behind the high inflation, the central bank’s control on money supply is the key reason, as credits has increased a staggering 38% this year.

Furthermore, the quality of life in general has become a matter of prime concern, even in urban areas which now encounter pollution, chronic traffic congestion, and traffic accidents, the two last-named problems alone cause damages equivalent to between 1% and 1.5% of the GDP.

Targets for 2008

Despite problems in the economy, there is still widespread confidence in the business community.

Prime Minister Nguyen Tan Dung in a national conference in Hanoi last week called for stronger efforts in 2008 to achieve a GDP growth rate of 9%, and the economy should attain high but sustainable growth. Inflation will take the limelight, so “the focus next year will be monetary policies on the part of the State Bank of Vietnam,” the Government leader said.

Export growth is set at 22% or higher to some US$58bil, while import spending will be put under closer supervision.

Investment in the economy in 2008 will continue to see the strong momentum given the confidence among investors. The basis for growth is solid, but the question is how to cope with challenges that WTO membership brings about along with opportunities.

Source: SGT.