Overseas investments soar as FDI plunges

23/5/2011
Source: VOV News

The past four months have seen a striking contrast between the influx in foreign direct investment (FDI) and outflow in Vietnamese investment.

While FDI inflow into the country dropped by almost 50 percent compared with the same period last year, Vietnamese investment abroad equalled 60 percent of the total outflow in 2010.

According to the Foreign Investment Agency (FIA) under the Ministry of Planning and Investment, in the first four months of the year, FDI inflow reached US$4 billion, down 47.8 percent against the same period last year. The Government licensed 262 new foreign-invested projects with a total capital of US$3.2 billion between January and April, a year-on-year reduction of 54.9 percent.

FIA figures also revealed that Vietnamese enterprises' overseas investment in the first four months amounted to US$1.8 billion, compared with the total overseas investment of US$3 billion in 2010.

The overseas investments are mainly in energy, rubber plantation and telecommunications projects.

These include the US$800 million Ha Se San 2 Hydropower Plant invested in by Electricity of Vietnam International JSC (EVNI); and the US$31.7 million rubber plantation project licensed to Chu Se-Kampong Thom JSC that will cover 4,000ha. Both investment licenses were granted by the Cambodian government.

By the end of February, local companies had invested in 575 projects in 55 countries and territories with total registered capital of US$23.7 billion. About US$4.3 billion of this overseas investment went into 88 projects in the mining sector, followed by the agriculture-forestry sector with US$1.87 billion.

In addition to neighbouring countries like Laos, Cambodia and Myanmar, local firms have also invested their money in destinations such as Japan, France, Germany, the US, Britain and African countries.

The outbound investment licensed in the first four months is also much higher than the target of US$1.5 to US$2 billion set earlier by the Ministry of Planning and Investment for the whole of 2011.

MPI statistics also indicate that overseas investments averaged US$66 million a project, much higher than the average US$14.6 million for FDI projects in the country.

However, the FIA said, the return on overseas investments has been very poor so far. Although their volume has risen steadily over the last few years, there has been increasing concerns over the efficiency of overseas investments.

Experts say the Government began encouraging local companies to invest overseas during 2007-2008, when the economy had ample capital sources. Now that the country is caught in macro-economic difficulties, it's necessary to reassess the feasibility of overseas investment projects, they add, citing the high trade deficit, unstable balance of payments and falling foreign reserves.

Dr Nguyen Minh Phong of the Hanoi Institute for Socio-Economic Studies noted that in some cases, local businesses have applied for an overseas investment project with the aim of purchasing properties or resettling themselves abroad.

But an ex-senior FIA official, who declined to be named, said at a time that the local market is experiencing difficulties, local companies should be allowed to invest their capital abroad and transfer profits back home.

To better check the efficiency of overseas investment projects, FIA has recently required Vietnamese investors with projects abroad to submit reports on their business performances.

The move aims in particular to check the efficiency of such projects as well as the transfer of capital abroad by State groups and enterprises.

"To regulate the capital outflow, it is necessary to monitor and analyse overseas investments, instead of depending on short-term data," Phong was quoted by the Dien Dan Doanh Nghiep (Business Forum) newspaper as saying.