Real estate market remains a magnet for FDI

The real estate market is still attracting  large amounts of FDI on a range of projects, such as the US-funded project worth US$902.5 million to build a convention and exhibition centre and trade and real estate centres in Ba Ria-Vung Tau, a US$304 million project to build an underground fuel depot at the Dzung Quat economic zone, a US$120 million real estate project by Daewoo-Binh Khanh Investment Company in HCM City, a US$100 million real estate project by the Slovakia-Vietnam Company and a Thai-funded project to operate and manage a central trade building at a cost of US$95 million.

More recently, the US’ Emerging Markets Group has proposed a US$3 billion real estate project in Van Don, Quang Ninh province.

Despite the newly-registered FDI in Vietnam in the first quarter of this year hitting only approximately 29 percent of the amount for the same period last year, US$2.13 billion, the real estate and hotel market still attracts the most FDI.

Not a few projects suspended

Looking back on the disbursement of real estate projects, there remain many suspended projects and the relevant agencies are finding it difficult to deal with them.

In HCM City alone, up to 40 FDI real estate projects with a total registered capital of US$1.77 billion had their licenses withdrawn due to the slowness of their operations, expired business permits or their overseas parent company going bankrupt.

In addition, numerous projects worth billions of US$, licensed two years ago have yet to get underway.

For instance, the investors Tano Capital, LLC and Global C&DA broke the ground on a US$4.15 billion project to build an eco-tourism area in Quang Nam two months ago but since then the project has ground to a halt. A US-funded project worth US$1.68 billion to build a city in Phu Yen is also in the same situation.

However, the real estate market continues to attract FDI. In the long term, it will need to develop further especially when the Vietnamese economy rebounds to reach a GDP growth rate of 7-8 percent. No wonder there will be plenty of opportunity for investors in real estate business.

The real estate sector, including office buildings, hotels, and the infrastructure in industrial zones, still hold enormous potential for an economy entering its second phase of development based on productivity, quality and competitiveness.

Vo Tri Thanh, Vice Head of the Central Institute for Economic Management, said it is quite understandable to see investors continuing to pour capital into this sector.

On the whole, however, many plans haven’t worked out for most of the large real estate and hotel projects in residential and big urban areas. As a result, many projects have been delayed or suspended due to site clearance problems.

Adding to the problem is poor local capacity and a lack of effort to attract foreign direct investment.

The inflows of FDI into industrial zones dropped in 2009 and in early 2010. Many big industrial zones even had to accept a 50 percent cut in FDI from the previous year. Quite a few zones have had to leave land untouched while a large proportion of their capital has already been used up. Some are also weighted down with huge costs resulting from site clearance.

All these have greatly affected plans to transfer technologies and develop support industries, as well as plans to increase the capacity of Vietnam’s industrial sector.

Mechanical engineering is one of the country’s core industries but has made little progress for years. Consequently, Vietnam has to import a large amount of machinery for production and processing, which leads to a high trade deficit.

The Deputy Minister of Industry and Trade, Do Huu Hao, said that Vietnam’s mechanical engineering sector has a limited source of capital and is in dire need of consultants and high-skilled workers, which results in low competitiveness in terms of quality and design.

Mr Hao suggested that the state comes up with innovative credit policies to help businesses invest in research, manufacturing and production. He added that businesses also need to take the initiative in cooperating with specialist institutes and universities to carry out research and train mechanical engineers.

In addition, said Mr Hao, the state’s management agencies should encourage overseas companies to invest in the manufacture of engines and other related machinery before transferring the bulk of their operations to Vietnam.

To attract more FDI is not realistic to rely on adjustments made by investors. The bottom line is that FDI only flows into the most favourable and profitable areas./.

(VOVNews.vn)