United States ambassador to Vietnam Michael Michalak said the global economic downturn had had a negative impact on foreign direct investment (FDI) all over the world. However, US investment in Vietnam would stay strong.

"I can say that the interest on the part of American companies in Vietnam remains very, very high," said Michalak, who said the US had been ranked as the number one foreign direct investor in Vietnam in the first months of 2009.

According to a newly released Ministry of Planning and Investment report, the US was ranked as the largest foreign investor in Vietnam in the first eight months of this year, with a total registered capital of USD 3.95 billion for 21 new projects and 10 existing ones that had raised their investment capital.

The ambassador said apart from recent large investment in semi conductors and fabrication plants, wind turbine plants and ports, US companies were also looking at the IT sector.

"I just had four or five IT companies at my house for a reception and they told me about many plans and there are some very interesting things happening for Vietnam in the future," said the ambassador, adding that some companies planned to use some Vietnamese software in various IT functions around the world.

Roberto Herrera-Lim, director of the US’ Eurasia Group, said American investors’ interest in Vietnam had substantially increased over the past three years. "The interest is coming from a wide range of sectors, from consumer and industrial product manufacturers to retailers," said Herrera-Lim. He said there were two major selling points for Vietnam.

The first was the reasonable cost of labour, which was an advantage for exporters and the second was the still relatively untapped domestic market. "American or western investment in Vietnam has the potential to expand greatly, beyond just the real estate and financial sectors, in the coming years," he said.

Murray Hiebert, senior director of the US Chamber of Commerce’s Asia Department in Washington DC, recently told a group of visiting Southeast Asia journalists that Vietnam was the favourite investment destination in the region for many American firms because of the nation’s determination to host foreign investment.

Hiebert said at one time Intel was thinking of investing in Thailand and Indonesia. However, it went with Vietnam because it was more willing to give the firm what it wanted. "Vietnam is pretty serious and more companies are going to Vietnam despite their serious issues like inefficient infrastructure, corruption and very few good engineers," said Hiebert. However, experts warned that the global crisis had reduced American investment throughout emerging markets and investments were now more selective and careful.

Regarding prospects for US investment in Vietnam, Herrera-Um said investors’ impressions of Vietnam’s economic fundamentals remained positive. However, he said Vietnam faced a lot of challenges.

"For these positive impressions to translate into real investments, Vietnam must convince the world that it is building the infrastructure that the country needs to be competitive, that macroeconomic management is improving, the rule of law is being developed and that corruption is declining," said Herrera Lim.

He added that the top two concerns of American investors over the business climate in Vietnam were infrastructure development and corruption. "The secret to going forward is going to be whether or not Vietnam continues the same pace of reform that it has followed up to now," said Michalak. He said Vietnam had undertaken a large number of economic reforms that had been very attractive to foreign investors. Therefore, further reforms would be a key for Vietnam to lure foreign investors.