FDI in Vietnam is defined as the ownership by a foreign investor of 10% or more of a Vietnamese business and it is a measure of the funds that the foreign parent provided to their Vietnam affiliate.
Statistics on new foreign direct investment in Vietnam of the FIA provide information on the acquisition, establishment, and expansion of Vietnam business enterprises by foreign direct investors.
The statistics include items such as the expenditures by foreign direct investors to acquire, establish, or expand Vietnamese business, as well as financial statement items and employment of the newly acquired, established, or expanded Vietnam business enterprises, and are published by country and industry.
The statistics are printed by the FIA in a manner that allows greenfield investment to be separately identified. A green field investment is a form of FDI where a parent company builds its operations in Vietnam from the ground up.
FDI reached a high of US$15.8 billion last year (up 9% from 2015), primarily based on expectations that the US backed Trans Pacific Partnership would materialize, said Le Xuan Sang, deputy director of the Vietnam Institute of Economics.
When the US withdrew its support for the TPP trade pact, FDI in Vietnam was adversely affected and tapered off sharply, he noted. He added that there are other factors that also contributed to the decline.
Nguyen Mai, chair of the Vietnam Association of Foreign-Invested Enterprises, points out that the Vietnam government has been justifiably clamping down on the environmental safety of manufacturing and this has slowed FDI inflows.
Still other economists make the somewhat ridiculous argument that the decision of the US Federal Reserve to hike interest rates last March made it more expensive for companies to invest in Vietnam and thus contributed to the slowdown.
The FIA has taken issue with the economists who make the latter argument saying that it is a somewhat odd rationalization and it isn’t clear why anyone would take such a far-out position.
Transnational companies, said Do Nhat Hoang, director of the FIA, don’t base their investment decisions on some minor adjustment to interest rates and it is silly to even suggest the US Federal Reserve move had or will have any impact.
Mr Hoang, noted that he believes the current lull in FDI will rebound based on the fact that Vietnam has political stability relative to other countries in ASEAN and because this is one of the key factors transnationals evaluate in making their decision to invest.
Still other investors are cautious about investing in Vietnam due to the spaghetti bowl of free and bilateral trade agreements. Transnational companies from Germany attending a recent investment seminar said they are hesitant to invest because the country’s trade agreements are just too complicated.
Most prudent business executives, they said, don’t enter into any agreement unless they can reasonably predict the outcome. The number and complexity of the trade deals Vietnam is involved in is just too overwhelming.