FDI: many figures, few explanations

Last update 12:00 | 15/12/2017

VietNamNet Bridge – By October 20, implemented foreign direct investment (FDI) had reached $14.2 billion and foreign portfolio investment (FPI) $4.7 billion, according to the General Statistics Office (GSO).

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By October 20, the implemented FDI had reached $14.2 billion

The public now can access figures about foreign investment monthly from the Foreign Investment Agency (FIA) and GSO, and quarterly from the State Bank of Vietnam (SBV), reflected in the Balance of Payments.

According to SBV, the disbursed FDI capital is estimated at $5.9 billion.

Foreign investors (both FDI and FPI) have disbursed $18.9 billion so far this year and commercial banks now hold $13 billion of the disbursed money.

However, under the current laws, the total foreign currency position of the banking system must not be higher than 20 percent of its regulatory capital, or $5 billion.

So how can the gap between figures exist, in the context of the surplus of $1 billion in trade balance as of October 15, 2017?

Technically, the total balance of payments will more truly reflect the inflow/outflow of foreign capital, because foreign investors, when making investments in Vietnam, must open accounts to record the receipts/expenditure of projects.

The total balance of payments will more truly reflect the inflow/outflow of foreign capital, because foreign investors, when making investments in Vietnam, must open accounts to record the receipts/expenditure of projects.

Therefore, the figure of $5.9 billion could be referred to as the amount of cash foreign investors disbursed under the mode of FDI. The remaining variation is affected by the following factors.

First, besides the disbursement in cash, foreign investors could also disburse money to pay for machines and equipment that serve implementation of projects.

Second, under the current calculation method applied by GSO, FDI capital comprises capital contributed by Vietnamese parties in joint ventures with foreign partners.

Third, many foreign investors have limited capital when making investment in Vietnam. After licensing, they seek capital from banks in Vietnam.

As such, the FDI capital flow into Vietnam is not as high as $14.2 billion as reported by GSO. The more reliable figure could be one shown on the total balance of payments announced by SBV every quarter.

FIA, the licensing body, releases monthly reports on FDI capital attraction, including newly registered and additionally invested capital, and on the capital foreign investors use to buy a stake in Vietnamese enterprises.

Due to the differences in calculation method and sphere of calculation, an investment item could be recorded as an FDI item by SBV, but as FPI by FIA.

GSO, in order to settle the problems, has released Decision 1849 to replace old regulations on calculating the capital disbursed by foreign investors.

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Thanh Lich

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