Viet Nam - A Guide for Business and Investment - asean-korea centre

PART II. THE ECONOMYFDI Distribution by Sectors by 2006While there are foreign invested projects in mostprovinces and cities in Viet Nam, most investmenthas been in the key economic areas in the South includingHo Chi Minh City, Dong Nai, Binh Duong, BaRia, Vung Tau, and in the North including Hanoi, HaiDuong, Hai Phong and Quang Ninh. Particular focushas been in Hanoi and Ho Chi Minh City which havemore developed infrastructure, higher purchasingpower and a more skilled labour force.In recent years there has also been an increase inprojects in the 100% foreign owned form. Theseprojects now account for 76.1% of the total licensedprojects and 58.1% of the registered capital, whilejoint venture enterprises make up 20.6% and 33.3%respectively. There are also 6 licensed foreign investedBOT projects in Viet Nam (water supply andelectricity plants) with a total registered capital ofUS$1.37 billion.The foreign invested sector has seen rapid growth,gradually asserting itself as a dynamic component ofthe economy, and has made an important contributionto enhancing the competitiveness and efficiencyof the economy. In recent years, the foreign investedsector has accounted for a quarter of the country’stotal investment, 43.6% (2004) of industrial output,57.2% (2005) of the national export, and 15.9% ofthe GDP of Viet Nam.FDI Contribution to GDP (%)2000 2001 2002 2003 2004 2005GDP 100.0 100.0 100.0 100.0 100.0 100.0State 39.0 39.0 38.4 39.1 39.2 38.4Non State 47.7 48.0 48.7 46.4 45.6 45.7FDI 13.3 13.0 13.8 14.5 15.2 15.9Source: General Statistics Office6. State-owned enterprisesequitization processThe Government of Viet Nam is very keen to promotethe SOEs reform program, i.e. the reorganisation andrestructuring and development of SOEs and StateOwned Commercial Banks to improve their productivityand efficiency.Since 1986, the Government has pursued the reformof State Owned Enterprises (SOEs) in three phases(restructure, renovation and development) throughthe implementation of 4 key measures:(i) reform of SOE management;(ii) reorganisation and reinforcement of state ownedgeneral corporations;(iii) SOEs equitisation;(iv) transferring, contracting, leasing and selling SOEs.Since 1998, the Government has formulated a detailedreform program focusing on equitisation ofstate companies. By the end of 2005, about 2,203enterprises and businesses had been equitised and127 enterprises were transferred or 76 enterpriseswere sold, 390 enterprises were merged. Small andmedium-sized enterprises account for 77% of equitisedSOEs and there are 54% SOEs with a total capitalof less than 5 billion VND and 23% SOEs with atotal capital from 5 billion VND to 10 billion VND. Accordingto certain surveys, the financial performanceand productivity of most equitised enterprises hasincreased which constitutes a positive sign.24 Viet Nam - A Guide for Business and Investment