Micro Foreign-invested Businesses Flock To Vietnam

In the first 3 months of 2018, Vietnam licensed 618 foreign invested projects

FDI down by 30 percent

The Foreign Investment Agency (FIA) has reported that in the first three months of 2018, Vietnam licensed 618 foreign invested projects with total registered capital of $2.12 billion. 

This means that the average investment capital for every project was $3.4 million only, just equal to one-third of that in 2014 ($10.43 million for every project).

Nguyen Mai, former Deputy Minister of Planning and Investment, warned that the average investment capital per project is getting smaller, including micro projects capitalized at $1-2 million. 

“The investment with such small capital is within the reach of private Vietnamese businesses,” Mai commented. 

Vietnam, in attracting foreign direct investment (FDI), seeks huge foreign capital. 

The FDI picture in the first quarter of the year was unsatisfactory, not only because of micro projects, but also because of the lack of multi-billion dollar projects.

The large-scale projects registered in Q1 were mostly expanded projects. LG Initek Hai Phong, for example, registered to raise its capital by $501 million, while Regina Miracle International Vietnam increased capital by $260 million.

Nguyen Van Toan, deputy chair of the Vietnam Association of Foreign Invested Enterprises (VAFIEs), thinks that small projects should be undertaken by Vietnamese investors.

“Why do we have to attract foreign investment and give them so many incentives while these small projects can be implemented by Vietnamese investors?” he said.

Another question raised was whether the smaller scale of FDI projects means that Vietnam’s investment environment is not attractive enough.

Pham Si An from the Vietnam Economics Institute said that small and micro FIEs are mostly satellite enterprises of large corporations. 

Big foreign investors tend to bring satellite enterprises with them when coming to Vietnam, so Vietnamese enterprises don’t have the chance to join large corporation’s production chains. This is one of the reasons why Vietnam’s support industries remain underdeveloped.

Mai said it is necessary to change the view about attracting FDI. “Instead of sitting here and waiting for foreign investors, we should meet foreign investors and ask them if they have interest in the projects we want to develop,” he said.

He said that Vietnam’s investment promotion agencies should carry out promotion campaigns with clear purposes and targets. Agencies should also think of other incentives to attract foreign investors, rather than rely on preferential tax rates and land-use rights access.

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