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FDI down sharply in Q3

Released at: 15:57, 11/10/2018

FDI down sharply in Q3

Photo: Ngoc Lan

New and additional capital take hit as disbursed capital up slightly, according to VEPR report.

by Ngoc Lan

Newly-registered FDI capital and additional capital in the third quarter of this year both fell sharply year-on-year, according to a report released by the Vietnam Center for Economic and Policy Research (VEPR) on October 10.

Registered capital was just $2.32 billion, down 14.7 per cent compared to the third quarter of 2017, while additional registered capital was $1.11 billion, down 31.1 per cent.

Disbursed capital amounted to $4.88 billion, an increase of 2.1 per cent.

Out of a total of 816 new projects in the third quarter, 279 were in the processing and manufacturing industry, with total registered capital of $3.41 billion. There were no large projects in the quarter, unlike the first and second.

Processing and manufacturing is considered a main driver of growth and its high growth of 12.9 per cent and added value created in the sector mainly comes from FDI. VEPR Director Mr. Nguyen Duc Thanh said that this shows a growing dependence of Vietnam’s economic growth on the FDI sector.

The report also noted that FDI continues to be the key point in trade in Vietnam’s economy, posing challenges for growth in the long term.

Dr. Le Dang Doanh, former Director of the Central Institute for Economic Management, said the contribution of FDI would be affected by the US Fed’s rate hike and the US-China trade conflict.

In the context of a global economy with many uncertainties, if there are unfavorable factors that make FDI enterprises withdraw production from Vietnam and move elsewhere with more favorable conditions, Vietnam will face many difficulties maintaining trade growth in particular and economic growth in general.

In the long term, in order to adapt to the current context, especially trade conflicts, VEPR’s research pointed out that Vietnam should rapidly reform its institutions in line with a market economy in order to avoid disadvantages in the way the US wants to create a precedent with China.

The trade conflict between the US and China is an opportunity for Vietnam to push for reforms to actively improve its own situation, given that the two countries are major trading partners.

According to the VEPR report, experts say that Vietnam’s macroeconomic situation is still weak and it should make every effort to create more policies to increase resilience to coming risks from the global environment, focus on reducing the budget deficit, increase the trade surplus, improve State-owned enterprises, rearrange the State apparatus, and fight corruption.

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