Larger projects divulge resources risks

More foreign direct investment capital is expected to flow into Vietnam but larger projects also bring bigger challenges to the country, economists have said.
The Ministry of Planning and Investment’s General Statistics Office (GSO) recently reported that Vietnam welcomed more than $5 billion in committed foreign direct investment (FDI) in the first three months of 2008, up 31 per cent on-year.
The GSO showed that less than a third of FDI commitments were disbursed but reflected positive investor outlook. “The outlook for FDI inflows looks promising given Vietnam’s still competitive labour costs, large potential domestic markets, robust growth, geographical proximity to China, and political and social stability,” said Daniel Hui, an HSBC economist.
Ayumi Konishi, ADB Vietnam’s country director, said the country’s on going structural reforms, the potential of the large market and its commitment to improving the business environment were other key factors attracting investment to Vietnam.
“Given the country’s medium to long-term economic strong growth prospects, I do strongly believe that Vietnam is a good FDI destination,” said Konishi.
According to the United Nations Conference on Trade and Development’s World Investment Report 2007, Vietnam ranked above India, Indonesia, the Philippines, Korea and Taiwan and came in at only 10 places behind China.
Vietnam is expected to maintain its 2007 momentum and is on target for around $20 billion in commitments for this year, said Hui. Economists however said that larger projects are placing a huge burden on the country’s scarce resources.
“These projects have created huge supply bottlenecks for skilled labour and scarce raw materials such as cement and steel,” an economist said, adding that larger FDI projects such as the $670 million Samsung mobile-phone plant and the $1 billion Intel plant would demand more workers. Daniel Hui warned that actual FDI inflows failed to keep up with reported commitments and the improvement of FDI absorption.
“Reasons include insufficient infrastructure, regulatory uncertainty and bottlenecks,” he said, adding that the resulting massive inflows into Vietnam have hurt exports through the dong’s appreciation. Ayumi said it was important for Vietnam to accelerate its reform efforts as well as infrastructure and human resource development, simplify administrative procedures for greater transparency, accountability and efficiency.
VIR 5.5

CPI continues to go down
According to a newly published statistic report of the General Statistics Office, Consumer Price Index (CPI) in April is 2.2%, lower than that in earlier months (2.38%, 3.56% and 2.99% in January, February and March respectively). The CPI decrease demonstrates that measures taken by the Government to curb inflation has started working.
The highest CPI increase was seen in food services (3.11%), transport fees and post (2.33%) and housing and building materials (2.62%). Hà Nội enjoyed the lowest CPI surge (1.49%), followed by Hồ Chí Minh City (1.82%). Cần Thơ City is the locality having the most rapid CPI growth (2.84%).
In April, industrial production has extended by 3.1% compared to March, and the increase in the first four months is 16.4% against the same period last year. The export turnover reached US $5.1 billion in April and US $18.26 billion in the first four months, up to 5.6% and 27.6% in comparison with March and the same period last year respectively.
VNGOP 4.5

FDI disbursement hits new monthly record

Foreign investment disbursed in April reached more than US$1.4 billion, the highest amount ever in a single month, according to the Ministry of Planning and Investment’s Foreign Investment Agency (FIA).
Last year, $8 billion was disbursed out of a total registered FDI of $21.3 billion, according to the FIA. There were now 8,600 foreign-invested projects pending or in progress nationwide, with $85 billion in registered capital, of which only $30 billion has been disbursed.
South Korea’s Halla Energy & Environment became the latest major foreign investor to disburse capital on Tuesday, breaking ground on a factory for producing heavy industrial equipment in the My Xuan B1 Industrial Park in the southern province of Ba Ria-Vung Tau.
"Having received an investment licence in January, we have now been able to begin construction of the facility from which products should hit the market by the end of this year. It’s unexpectedly fast," said Vina Halla general director Ho Yong Shon.
Le Minh Chau, director of the Ba Ria-Vung Tau industrial zones management board, said the province’s FDI disbursement rates, the ratio of disbursed capital over registered capital, had reached 45 per cent.
"Most foreign-invested pro-jects in the province are implemented on schedule," Chau said.
Dong Nai Department of Planning and Investment director Bo Ngoc Thu boasted that the province’s FDI disbursement rates had reached about 57 per cent.
In the southern province of Dong Nai, two real estate projects covering sites of 366ha and 305ha, had investment licences issued last Friday and saw construction begin only five days later, said Thu.
"We are fully aware of the importance of preparing sites for investors. Most foreign-invested projects in industrial zones can disburse capital as soon as investors receive investment licences," said Foreign Investment Agency director Phan Huu Thang.
Thang said authorities were making great efforts to reduce the lapse between registration and disbursement of capital. Disbursement currently lagged considerably behind registration, he said.
"Our goal is to have disbursement reach up to 50 per cent of last year’s registered capital, with a target to reach disbursement of about $10 billion this year," he said. "But a higher figure could be reached if all localities deal effectively with site clearance."
Dong Nai, besides building resettlement areas, has piloted farmers joining their capital with companies in the form of contributing their land to projects such as the $750 million Dong Nai Waterfront City and $305 million Aqua City.
"Farmers will enjoy direct benefits from their capital contributions, while avoiding disruption to their livelihoods," said the provincial Department of Planning and Investment.
Thang also said projects that fall behind schedule without legitimate reason would have their licences revoked. This month and next, in accordance with Ministry of Planning and Investment directions, authorities would conduct a review of projects in some major cities and provinces, recommending some for revocation of investment licences. 
VNS 4.5

Government lifts cap on foreign employees

The Vietnamese Government’s decision to abolish its previous decree capping the foreign workforce at 3 per cent for all businesses is considered a move toward creating a new generation of managers in Viet Nam.
As the country faces a serious shortage of managers at medium and high levels, it is necessary to adopt a policy wide open to foreign expertise, said Walter Blocker, CEO of Gannon Co.
Blocker went on to say that many Vietnamese holding high-level posts at enterprises had either been trained by, or worked at, foreign firms for a period of time, so that conversely, the open policy for foreign managers will help improve the quality of local experts.
Concurring with Blocker, Phan Thi Thuy Duong at PriceWaterHouse Cooper in Viet Nam said the lifting of the 3 per cent cap on foreign workforce would enable enterprises to be more active in their human resource recruitment strategy, providing enterprises with a wider recruitment base for employees should the pool of local job-seekers appear underqualified, and easing the shortage of managers in some sectors.
Regarding the worry about a possible wave of foreign managers seeking jobs in Viet Nam in the near future, Doan Mau Diep, director of the Labour and Society Institute under the Ministry of Labour, War Invalids and Social Affairs, pointed out that enterprises always prefer local employees due to their deep understanding of the local culture, their relationship to their native country as well as low cost.
At the same time, enterprises are working out long-term strategies for local personnel development with the hope that in the future, these well-trained people will fill almost all the posts previously held by foreigners.
According to the website vietnamworks.com, foreign workers recruited by Vietnamese enterprises in the first quarter this year increased 67 per cent compared with late 2007. This trend is forecast to continue.
VNS 4.5

MIT confirms growth of industrial value and trade turnover in April

According to the latest report of the Ministry of Industry and Trade (MIT), the April industrial output continued to obtain a two-digit growth. Trade activities were very boisterous.  
Industrial production value  in April increased 16.8% against the same period in 2007
The industrial production value in April is estimated to reach VND 55 trillion, rising up 16.8%, compared to the same month in 2007. The figures were VND 215 trillion and 16.4% respectively in the first four months.
The fastest-growing industrial players were the Việt Nam Electricity, Việt Nam National Coal- Mineral Industry Group and the Việt Nam National Chemical Corporation.  
Industrial products for manufacture, consumption and export continued to rise, such as electricity (17.8%), steel (20.4%) and vegetable oil (33.7%). 
Goods and services turnover scored VND 73.6 trillion in April, increasing 1.8% against March. The highest growth was seen in the sectors of trade, hotel, restaurant, tourism and services.
In order to maintain the development, it is necessary to boost exports of competitive advantages. And this should be considered an effective measure to reduce trade deficit.
VNGOP 4.5