4
Contribution of FDI to economic growth
After more than 30 years of opening up to
attract foreign direct investment (FDI), FDI has
become the engine for growth and development
in Vietnam. FDI inflows into Vietnam have
increased sharply since 2007, thus significantly
raising the resources for socio-economic
development. In the period from early 2007 to
November 2017, there were more than 18,000
new licensed projects, equivalent to 2.2 times
the number of projects in the 1988-2006 period.
Since 2007 the total of newly and additionally
registered capital has reached USD 296.4 billion,
equivalent to 3.8 times the capital in the period
before WTO.
Disbursement of FDI increased more
sustainably. In the period of 2008-2013, the
disbursed FDI amounted to USD 10-11.5 billion/
year. The disbursed FDI inflows continued to
increase rapidly, reaching USD 15.8 billion in
2016 and USD 17.5 billion in 2017. The proportion
of the FDI in the total social investment in the
society increased from 14.9% in 2007 to 23.4%
in 2016. This resulted mainly from: (i) More
opportunities for foreign investors fromFTAs that
Vietnamhas been negotiating and implementing;
(ii) The Government’s, ministries’, sectors’ and
locals’ fforts to improve the investment and
business environment. As a result, the FDI sector
contributed significantly to the output and total
investment for the overall social development.
Foreign-invested enterprises also created direct
employment for more than 2 million labors,
considerably contributed to the improvement of
labor skills as well as the restructuring of rural
labor force in the past
years.
Howe ve r ,
d a t a
on FDI registration
and d i sbur s emen t
are difficult to cover
i n a d e q u a c i e s
i n
a t t r a c t i ng f o r e i gn
investment such as:
Firstly,
the added
value of the FDI
sector contributed to
the economy is not
Firstly,
industrial growth depended a lot on
capital, resources and low-level labor force,
which has not brought into playing the knowhow,
science and technology and skilled labor.
Secondly,
some key industrial sectors have not
applied the value chain model into organization,
especially in export-oriented industries.
Currently, Vietnam is only able to participate in
low-value-added stages such as processing and
assembling, not being able to take initiatives in
production supply.
Thirdly,
the fact that the industry depended
significantly on imported inputs made it less
active and more vulnerable to the fluctuations
of the world market, especially prices of inputs
imported for production.
Over the past years, there have been
remarkable achievements in the service sector.
As a result, the contribution of the service sector
to the total GDP also increased over the years
(2000: 38.74%, 2005: 42.57%, 42.88% in 2005
and 41.32% in 2017). However, the proportion
of services in GDP in Vietnam was still low
compared that in many countries and territories
(ranked 8/10 in Southeast Asia, ranked 29/34 in
Asia, ranked 94 out of 104 countries worldwide).
The development in service sector is still not
commensurate with the potential of the economy
and requirements of the country’s economic
development. In this context, the demand for
service development is of great significance,
not only directly driving development, but also
establishing and consolidating the linkages and
securing outputs for the agro-industrial sectors
as well as spreading its effects to all sectors of
the economy.
Cyclicity
VNDbilion
GDP (Seasonal correction)
GDP trend
GDPgrowth
GDPgrowth trend
FIGURE 2. GROWTH CHANGE IN COMPARISON WITH POTENTIAL
Source: Calculated by the Author
