Most financial commentators expected a tough year, especially with regards to attracting foreign direct investment (FDI). But recent growth figures came as a shock to even the most pessimistic forecasters.
The Ministry of Planning and Investment reported a huge drop in FDI in January, which fell to US$200 million this year from last year’s $1.7 billion.
The figure represented only 18 per cent of the amount of FDI capital poured into the country just a month ago.
Foreign companies’ total disbursement in January fell 30% from the same period last year.
The director of the ministry’s Foreign Investment Agency, Phan Huu Thang, said the sharp drop in FDI value in January was because most projects licensed during the month were small-scale and had a registered capital of only $3–3.5 million each. The largest FDI project in January had a total registered capital of only $20 million.
Thang attributed the decrease to the impacts of the world economic slowdown which has caused investment flows to shrink globally.
However, Thang expects FDI attraction to get better in February. He revealed that a $200 million tourism project is expected to be licensed in southern Ba Ria-Vung Tau Province this month.
He revealed that his ministry had so far mapped out plans, including the speeding-up of administrative reform in investment licensing and site clearance procedures to attract more FDI in 2009.
January’s figures also look bleak for the country’s exports and imports.
Export turnovers in January reached only $3.8 billion, down 18.6% from December and 24.2% from the same month last year, according to the General Statistics Office (GSO).
GSO experts said the drop in price of Vietnamese export goods was the main cause for the fall in earnings this month.
In January, the price of 23 out of Viet Nam’s 25 exported products fell sharply. The price of crude oil decreased by 57.7%; the price of rubber dropped by 43%; and the price of pepper was down 20% from a year ago.
Major export markets such as the United States, the EU and Japan have reduced their orders because of sinking demand, the GSO reported.
A similar trend was reported for industrial production in the first month of this year. It dropped 4.4% over the same period last year, to VND50.64 trillion ($3 million), according to GSO.
Many of the country’s major industrial products have posted production decreases in January. The production of coal and television was down nearly 30%, fertiliser by 18% and footwear by 17%. Figures for steel and fabric production shrank by 14 per cent and 8.5 per cent this month, respectively.
Besides the impacts of the global financial crisis, experts also put lower domestic industrial production this month down to fierce international competition. Competition heated-up recently after the implementation of the country’s international commitments.
Under the World Trade Organisation commitments, the country has to reduce import tariffs on a number of consumer goods, making it easier for imported goods to flow into the country. This has forced domestic producers - especially those in processing industries - to cut production.
Consumer price index (CPI) trends in January also stood out from previous years.
CPI in January - formerly the month for the highest consumption demand - increased only 0.32 per cent against December 2008’s figure.
With the increase of CPI in January, officials forecast CPI in the whole year would increase only slightly.
Officials warned that January’s worrying figures could make it hard for the country to meet its annual economic growth targets this year. (VNS)
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