The General Statistics Office (GSO) has reported the sharp decrease of 50 percent in registered FDI capital in the first six months of 2011, in comparison with the same period of the last year.

According to the Ministry of Planning and Investment’s Foreign Investment Agency, most of the newly registered projects belong to HCM City (124 projects) and Hanoi (108). The total FDI capital registered in the first half of the year was 4.4 billion dollars, and if counting on the registered additional capital of operational projects, the figure would be 5.6 billion dollars, equal to 56.7 percent of that of the same period of 2010.

The disbursement rate of foreign invested projects has also been decreasing.

As such, the FDI has been decreasing for the last three consecutive years. In 2008, the FDI capital reached the record high of 71.7 billion dollars. However, the figure dropped to 23.1 billion dollars in 2010. Meanwhile, experts think that the figure would be 20 billion dollars only in 2011.

Phan Huu Thang, former Director of the Foreign Investment Agency, now is the Director of the FDI Research Center, a unit of the Hanoi National University, has attributed the decline in the FDI in Vietnam to the decrease of the global investment flow due to the global economic crisis.

Thang said that due to the economic difficulties, the countries, which provide FDI, now have to focus on stabilizing the domestic situation and restructure the outward investments. Meanwhile, foreign invested enterprises in Vietnam are now facing big difficulties due to the high inflation and the financial policies.

As a result, many foreign investors, who plan to come to Vietnam, have delayed their plans. They wait for the situation in Vietnam to become stabilized to make investment.

“It was previously forecasted that the global FDI flow would be stabilized in 2011, but to date, no bright prospect has been seen,” Thang said.

He went on to say that in order to better attract FDI in the time to come, Vietnam needs to perfect its legal framework on investment, and upgrade the infrastructure and the workforce. “Only when the national economy gets stabilized, the business environment becomes better, will foreign investors resume negotiations and begin seeking investment projects in Vietnam,” Thang said.

In the report about Vietnam’s economic development released by the World Bank, the financial institution pointed out that the FDI falls should not be attributed only to the global economic difficulties, but to macroeconomic instability, to the electricity shortage and the lack of skilled workers.

Investment environment getting worse?

Economists have expressed their worry that the declines in the FDI disbursement would badly affect the general payment balance, thus putting more pressure on the foreign currency supply, especially when the trade deficit has not been considerably improved yet.

Meanwhile, Nguyen Dinh Cung, Deputy Director of the Central Institute for Economic Management (CIEM), said that it is necessary to analyze the FDI falls in different fields.

“It should be seen a good thing if the FDI is into the real estate sector and into the projects which use much energy or apply low technologies,” he said.

“The slowdown of the FDI capital flow to restructure the quality of the capital flow would open a new stage in attracting FDI in Vietnam,” he added.

Dr Vo Tri Thanh, Deputy Head of CIEM, said it is necessary to split the figure about the registered FDI capital and the figure about the disbursement rate. The figure about committed capital partially reflects the macroeconomic situation, and the newly released figure shows that the environment is weakening.

He also said that the implemented FDI capital shows that the current investment environment is a hindrance to the FDI attraction.

Source: VietnamNet.