Viet Nam would continue to remain an attractive destination for foreign investment despite short-term problems arising out of the global crisis, former Vice President Truong My Hoa said yesterday.

Chairing the International Investment Across Viet Nam conference in HCM City, Hoa said that one of the most significant achievements of Viet Nam in the last 15 years was the progress made towards free trade and the success recorded in attracting foreign direct investment (FDI).

"Though the economy is likely to witness some problematic issues in the short term, foreign investors, on evaluating the country’s potentials, still have positive expectations about Viet Nam’s growth in the mid and long term," said Hoa.

The government estimates that the total national investment in 2008 will reach VND585 trillion (US$34.8 billion), with State budget capital at VND84.8 trillion ($5 billion), accounting for 14.5 per cent.

Hoa said FDI had hit record highs, and was a "shining spotlight on the economy’s outlook." She noted that FDI had shifted from the services to the industrial sector thanks to two "super projects" with total investments of $14.1 billion – the $7.9 billion Huong Nghiep Formusa Steel Project; and the $6.2 billion Nghi Son Oil Refinery.

The steel project is backed by the Taiwanese Formosa group in Vung Ang, Ha Tinh Province, and the refinery by Japan and Kuwaiti conglomerates in Thanh Hoa Province.

Hoa said official development assistance (ODA) inflows would play an important role in infrastructure development and environmental protection. The total registered ODA in 2008 was $3.1 billion, of which $2.5 billion was official loans and $529 million came as non-refundable aid.

"Confronted with the global economic turmoil, a high inflation rate and macro-economic downturn, Viet Nam will share these common challenges with the world.

"At the moment, we have more time to look back on ourselves and put it all in perspective and sort out and apply effective overall solutions," said Hoa.

She said the government would take the leading role in guiding the macro-economic system through a fluctuating period, particularly prone to external shocks.

"In the bid for successful international economic integration in an extensive range of sectors, including trade, tourism and investment attraction, investment funds and international investors play an important role."

Alain Cany, chairman of the European Chamber of Commerce, told the conference that the pressure of the global financial crisis continues despite strong intervention by the US Federal Reserve and other G7 central banks.

He said Viet Nam overheated in early 2008 but the third quarter saw improved economic numbers, such as improved growth due to a good rice harvest, FDI amounting to $57 billion by late September, foreign currency reserves of $21 billion, and a stablised VND exchange rate. The tight fiscal and monetary policies imposed in Q2 reduced inflation and decreased growth of the trade deficit.

Cany said the immediate impact of the global crisis on Viet Nam would be limited, more indirect than direct, due to the banking sector’s limited exposure to international financial markets and international capital flows. He added GDP growth might slow to nearly 6 per cent in 2009 (against the official target of 6.5 per cent) while portfolio capital inflows would be lower.

"However, if the global slowdown is prolonged, Viet Nam will be affected," said Cany. He said that deflationary pressure as commodity prices continued to fall would hit all export-led countries, including Viet Nam.

Le Duong Quang, deputy minister for industry and trade, said one of the most significant issues in WTO discussions was the liberalisation of the capital market. He said it was often assumed by developed countries that liberalisation of the capital market should be the purpose, rather than the means, to achieve fair trade and sustainable development under globalisation and economic integration.

"As a small country that has recently joined the global export market, Viet Nam’s products could not ask for their prices in the global market. In such circumstances, we encourage both capital market and investments to develop in line with sustainable development to prevent any possible shocks to national production and trade," said Quang.

"In the global financial turmoil, along with immature operation of the capital market to run itself in line with the socio-economic development targets, we witnessed improper portfolio investment compared with the socio-development targets, although we were able to attract FDI in the past period".

"When the Government tightened its monetary and financial policies, business became frozen, cash was scarce and investor confidence had declined. The recent adjustments aim to encourage and support companies to tackle external economic shocks and maintain normal business operations to ensure full employment instead of massive lay-offs due to economic downturns.

"I would like to clarify that internartional investment here should mean mid-term and long-term international investment – this is extremely important," said Quang.

"When the savings for investment are low, foreign investment into Viet Nam, properly distributed in accordance with the structure of industries and national development, will help Viet Nam grow into an increasingly prosperous country," he added.

About 400 delegates, half of them from overseas capital funds, attended the investment conference which was organised by Vinacapital, a leading assset management firm.