Some leave, others stay
By Quoc Hung in HCMC
The global economic recession has had serious effects on foreign direct investment worldwide and Vietnam is not out of the circle. However, the country’s FDI appeal has its bright spots.
Leave and delay
Economists are skeptical of projects capitalized at more than US$1 billion because international companies have been feeling the pinch of the global slump.
The Ministry of Industry and Trade found that a number of steel mill projects have been on hold for a long time, particularly those involving India’s Essar Steel, Taiwan’s Thien Huong and Formosa. The high-profile project between Essar Steel (65% stake), Vietnam Steel Corp (20%) and Vietnam Rubber Group (15%) has been hanging in the balance. The investors originally planned to inject over half a billion U.S. dollars into phase one of the hot strip mill but Essar is seeking a local partner for a stake transfer.
Other projects worth billions of U.S. dollars in the real estate sector were also canceled or delayed.
According to international experts, the steady oil price increases over the last four or five years, which saw one barrel of oil rocketing to over US$100 at one point, have brought colossal profit to investors in the Middle East.
Those investors plan to invest these vast sums in other countries. Analysts believe that the investment capital from the UAE will flow into the fields of construction, real estate, port and tourism. This is a valuable opportunity for Vietnam to attract major investment from UAE companies. But the global economic crisis has spared no countries.
Dubai World of the UAE earlier this year asked Quang Ninh authorities to extend the planning of its project by up to six months. Dubai World’s subsidiary Limitless LLC will cooperate with the local firm Saigon Fuel Shipping Co. Ltd, or Safuco, to develop an industrial park, a new urban area, a port and luxury hotels worth billions of U.S dollars. Dubai World had also planned to invest billions of dollars to build a new urban area in HCMC’s Cu Chi District but the investor backed out.
Stay and expand
Many experts and foreign investors believe in Vietnam’s investment environment and say that Vietnam will continue to be an attractive destination for international investors in years to come.
Although this has been a tough year for attracting FDI, this is also the time Vietnam needs to review the financial capacities of investors who have been licensed.
In 2007 and 2008, Vietnam attracted FDI capital of US$85 billion, a twenty fold increase compared to the FDI for the 19 previous years combined. The FDI sector grew and flourished thanks to an increasing number of newly licensed projects and the volume of registered and disbursed capital. With the big committed capital in the last two years, the new FDI goal focuses on disbursements, said experts.
South Korea’s Samsung Electronics Co. opened the first phase of a US$670 million cell-phone factory in the northern province of Bac Ninh in April to mainly supply foreign markets. The plant can produce 30 million mobile phones a year and will eventually produce 100 million units a year.
U.S.-based Sparton Corporation, established 109 years ago, is expanding its Vietnamese subsidiary, Spartronics Vietnam. Cary B. Wood, president and CEO of Sparton Corp., said more investment would be made for Spartronics Vietnam to expand its manufacturing scope.
Spartronics Vietnam is an electronics manufacturing service provider with a focus on the aerospace, transportation, communications and medical industries. The parent firm closed a plant stateside and shipped the equipment and production lines to its subsidiary, Wood said.
“We’ve been fortunate to have expanded manufacturing at Spartronics Vietnam because it makes sense logistically and economically for us and for our customers,” Wood said. According to the company, its factory in Jackson City, Michigan will be closed in June and its equipment is being shipped to Vietnam. “We’re already well underway with the transfer of production to Vietnam, using advanced product planning tools to ensure a smooth transition,” added Wood.
Nippon Steel Corp., the world’s second-biggest steelmaker, bought a 15% stake in the cold-rolled steel plant which is being built in Ba Ria-Vung Tau by South Korea’s Posco. The plant will have a capacity of 1.2 million tons, producing cold-rolled products such as sheet steel for cars and electronics. The factory is expected to start production this year.
The Korean steelmaker said it would spend US$1.13 billion to build two steel mills in the province by 2012 to produce hot-rolled and cold-rolled steel coil.
Syamal Gupta, chairman of India’s Tata International Limited, said that Tata and its partners in Vietnam were accelerating procedures for a steel project worth US$5 billion in Ha Tinh Province’s Vung Ang Economic Zone, with the ultimate capacity reaching 4.5 million tons a year.
Gupta is committed to long-term investment in Vietnam and is confident that the difficulties faced by the Vietnamese economy will soon be over. He said that Tata considered Vietnam one of the most important Asian markets in its international expansion strategy and Tata is considering investing in hotels and auto and power projects and is negotiating with a local partner, Vinamotor, over a project to manufacture vehicles including trucks and light commercial vehicles.
Singapore-based Sembcorp Industrial Parks Ltd., known as the leader in industrial park development in Vietnam, is diversifying its investments into other areas while maintaining the pace of developing industrial estates.
Executive chairwoman Low Sin Leng said that the corporation was seeking new projects in electricity, wastewater treatment and environment protection among others and was inviting stakeholders to join forces in property projects.
Sembcorp has developed two large industrial parks named VSIP 1 and VSIP 2. Low admitted that the global financial meltdown had adversely affected the flow of investment into industrial parks but said that Sembcorp was confident in Vietnam in the medium and long term. She said that this was the time Sembcorp and its partners should develop infrastructure quickly to be ready for investors when the global economy recovers.
Sembcorp is developing infrastructure at new industrial park and residential projects in Bac Ninh Province and Haiphong City, both in the country’s north, and is expanding VSIP II in the southern province of Binh Duong.
Phan Huu Thang, head of the Foreign Investment Agency of the Ministry of Planning and Investment, said this year’s FDI disbursements had been forecast to reach US$11 billion, down from the US$11.5 billion in 2008.
Thang said that the prospects for medium- and long-term investment projects in Vietnam remained good as the country had major advantages such as political stability, improved infrastructure and legal frameworks.
The Saigon Times Daily
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