Vietnam FDI inflow drops 1.9pc

HANOI: Foreign direct investment to Vietnam dropped 1.9 percent to $5.3 billion in the first six months of 2011, state-run media reported on Sunday.

Foreign direct investment (FDI) in June alone dropped to $780 million, from nearly $900 million last month and $900 in June 2010, the Saigon Times Online newspaper said in a report

Pledges and newly increased capital in the six-month period fell 37.3 percent from a year ago to a combined $5.67 billion, said the report, citing the Planning and Investment Ministry.

Vietnam's economy has been struggling with double-digit inflation and the government has had to cut its growth target this year to 6 percent from an initial projection of 7-7.5 percent and tighten money supply to help reign in the rising prices.

All three major ratings agencies Fitch, Moody's and Standard & Poor's cut Vietnam's credit ratings in 2010, highlighting economic risks and underscoring the problems in the southeast Asian country's economy, once a favoured frontier investment.

FDI in Vietnam is expected to reach $11 billion to $11.5 billion this year, about the same as in 2010 or slightly higher, while new pledges are expected to rise 16 percent to $20 billion, the government has said.

FDI, overseas remittances and aid money are important sources of foreign exchange for Vietnam, helping to offset its trade deficit, which is forecast to rise 19 percent in the first six months from the same period last year to an estimated $7.5 billion.

COPYRIGHT REUTERS, 2011