Foreign Direct Investments remains key driver of Vietnam's export growth

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HANOI, May 21 (Xinhua): Vietnam's foreign direct invested (FDI) businesses posted more than US$14 billion in trade surplus in the first four months of this year, as the global economic slowdown is weighing on exports, the Vietnam News has reported.

Vietnam's overseas shipments in the January-April period shrank 11.8 per cent from a year earlier to 108.57 billion dollars, according to the General Statistics Office.

FDI companies accounted for 73.7 per cent of the country's exports in the period, earning nearly US$79.99 billion, down 12.1 per cent from a year ago, said the statistics office.

Imports by FDI companies in the first four months fell 17.4 percent year-on-year to 65.6 billion dollars as Vietnam's imports dipped 15.4 per cent to US$102.22 billion over the same period, official data showed.

As global investors have flocked to Vietnam, seeking to turn such competitive advantages as Vietnam's labor costs, tax incentives and potential market in their favor, they have significantly contributed to the country's export growth, job creation and value-added creation in key industries such as electronics, garment, and footwear, said Phan Huu Thang, former director of the Foreign Investment Agency under the Ministry of Planning and Investment.

In an attempt to promote exports, Vietnam has also sought to attract FDI through bilateral and multilateral free trade agreements. Together with various incentive policies and legal reforms, Vietnam has emerged as one of the most attractive destinations for foreign investors in the region.

Nevertheless, Vietnam's over-reliance on FDI has been seen as a potential problem for the country. While foreign invested companies account for only about 20 per cent of Vietnam's GDP, they contribute up to 70 per cent to Vietnam's total export turnover.

"An economic structure that is overly dependent on external demands and export capacity of the FDI sector makes the economy highly vulnerable to global crises," said economist Vu Thanh Tu Anh.

A key solution is to strengthen production and export capabilities of local companies by encouraging them to work with foreign firms, to participate in the global value chain so that they would develop and play a bigger role in the economy, said economist Le Quoc Phuong. - Xinhua