Foreign direct investment (FDI) projects have made important contributions to Vietnam’s socio-economic development despite several shortcomings in the slow capital disbursement process.

Deputy Minister of Planning and Investment Dao Quang Thu said over the past 25 years FDI inflows have helped boost economic growth and increase the effective use of investment funds in Vietnam.

The FDI sector achieves its highest growth of 8.12 percent in 2012 while the nation’s GDP grew by just 6.78 percent. Most of FDI projects have paid off well, with their contributions rising from 2 percent in 1992 to 18.9 percent in 2011.

According to the Ministry of Planning and Investment’s Foreign Investment Agency, Vietnam had more than 14,500 FDI projects in operation by the end of last year, with a total capitalization of US$210.5 billion mainly in the manufacturing and processing industries ( 50.3 percent), and the real estate sector ( 23.6 percent).

Among 100 countries and territories investing in Vietnam, Japan ranks first (US$28.6 billion), followed by Taiwan, Singapore, and the Republic of Korea.

Ho Chi Minh City tops the list of localities in terms of FDI attraction (US$32.2 billion) and its runners-up are Ba Ria-Vung Tau, Hanoi, Dong Nai and Binh Duong.

Deputy Minister Dao Quang Thu emphasized that FDI projects provided a huge amount of capital for social investment estimated at US$20.67 billion or 24.32 percent of the total finding in the 1991-2000 period, then at US$69.47 billion or 22.75 percent in the following decade.

Their contribution to the nation’s economic structure in general accounted for 5.4 percent in 2001-2011, he added.

Since 2003, FDI projects have proved to be a key factor in increasing export turnover, accounting for around 64 percent of Vietnam’s total export earnings. They have helped boost the export of processed goods instead of raw products.

Thu highlighted the FDI sector’s fast approach to potential markets overseas, particularly to the European Union and the US and its positive contribution to stabilizing the domestic market and reducing the trade deficit.

It contributed to the State budget US$1.8 billion in 1994-2000 to US$14.2 billion in 2001-2011, and US$3.7 billion in 2012 alone, helping shift Vietnam’s economic structure towards industrialization and modernization. Most of its projects focused on improving human resource training, boosting technology transfer, creating a healthy business climate, and speeding up the process of international economic integration.

However, Deputy Minister Thu said the efficiency of FDI projects is still below par as seen in the industrial construction, agro-forestry and aquaculture sector, which are considered to be Vietnam’s strengths.

He was also worried about the wasteful use of capital and land in some FDI projects, and called for increasing investment in education, health care and environmental protection.

Thu suggested FDI projects give priority to disadvantaged areas, close to industrial or high-tech parks, and economic zones.

He said most foreign investors in Vietnam are from Asia and only keen on medium-size projects, and the rate of capital disbursement remains modest.

Only 5 or 6 percent of FDI projects apply leading-edge technologies while more than 80 percent of them still use the existing ones in the world.

In addition, the FDI sector accounts for only 3.4 percent of the country’s total employed workers, much lower than the State-owned sector.