Foreign direct investment (FDI) approvals in Vietnam in January-August amounted to a record high of US$46.3 billion, with the tourism and real estate sectors accounting for nearly a half.

This FDI figure represents an increase of five times over the same period last year, according to the Ministry of Planning and Investment's Foreign Investment Agency.

Of the US$22.2 billion committed to the tourism and real estate sectors, some US$4.8 billion went to high-class urban towns, US$8.5 billion to office-for-rent buildings, around US$8.8 billion to tourism and hotels, and the rest to infrastructure for export processing and industrial parks.

Brunei's New City Properties Development Co. last month received a license to develop what is Vietnam's biggest foreign-invested tourism project worth about US$4.35 billion in the central province of Phu Yen.

It is followed by Canada's Asian Coast Development Ltd.'s Ho Tram Strip tourism project, which was licensed in May with total capital of US$4.2 billion in the southern province of Ba Ria-Vung Tau. Another major tourism project is a US$1.65 billion resort, golf course and apartment complex in the Mekong Delta province of Kien Giang, which will be developed by the Starbay Holding Ltd.

A US$3.4 billion university township to be developed in HCMC by Malaysia's Berjaya Leisure Group is the biggest to have been licensed in the real estate sector in the period.

However, there are mixed reactions to the higher-than-expected FDI approvals for the two sectors.

Skeptical experts said the fact that half the approved FDI capital went to tourism and real estate projects in January-August could not help the country cope with major economic issues like the trade deficit.

The big flow of capital into realty has aroused economists' angst. Foreign investors will have to import massive amounts of materials and equipment to implement their projects, thus accelerating the trade deficit, which is forecast to hit an estimated US$16 billion in the first eight months.

Real estate projects will not export products while their revenue will be in Vietnamese dong, so foreign investors will need to convert the money into foreign currency and repatriate it to their home countries, affecting Vietnam's foreign exchange balance.

These experts said these real estate investments would neither create a lot of jobs nor boost technology transfer, production and exports while needing much land. On the contrary, Phan Huu Thang, head of the Foreign Investment Agency, said there was nothing to worry about.

He said Vietnam was facing a shortage of supply in the property sector. The country still lacks five-star hotels and high-end office buildings, so foreign investment is needed to develop these properties, he said.

He suggested authorities and relevant agencies improve their capacity in capital management, supervision and disbursement to ensure a balanced and suitable pattern of development for their localities.

Back to the new FDI approvals in January-August, according to Thang's agency, the first eight months saw 210 operational projects adding an extra US$833 million, so the amount of FDI in the period totaled an all-time high of US$47.15 billion.

The service sector remained the magnet for FDI, with US$23.6 billion pledged, or 50.9% of the total. Meanwhile, US$22.5billionwentto manufacturing and construction sectors, and the rest to the agro-forestry-fishery sectors.

Taiwan continued to top the list of 38 foreign investors in Vietnam, with 112 projects capitalized at US$8.6 billion, followed by Japan with 78 projects worth US$7.25 billion, Malaysia with 29 projects valued at US$5.07 billion, Brunei with 14 projects totaling over US$4.3 billion and Canada with six projects worth US$4.23 billion.

The southern province of Ba Ria-Vung Tau took the lead in FDI attraction, accounting for 20.1% of the total, followed by HCMC, Ha Tinh, Thanh Hoa, Phu Yen, Kien Giang, Dong Nai, Thua Thien Hue, Bac Ninh and Hanoi.

In the first eight month s of the year, US$8 billion in FDI capital was disbursed, a year-on-year increase of 42.9%. The figure for all of 2008 is expected to reach about US$10 billion, up 25% from last year.

Source: Saigon Times