Addressing Barriers for FDI Attraction

The Foreign Investment Agency (FIA) under the Ministry of Planning and Investment, said: Vietnam will remain a magnet to FDI capital in 2010. However, to maximise the effectiveness of this investment capital source, the country needs to overcome the weakness of infrastructure, improve the legal framework and create favourable conditions for registered FDI to be disbursed.

 

In 2010, Vietnam is expected to attract US$22-25 billion of registered FDI capital. The disbursed capital is estimated to reach US$11 billion, up about 10 % from 2009. In fact, weak infrastructure put a brake on FDI capital disbursement. In 2008, registered FDI was US$71.7 billion but the actual disbursement was only US$11.5 billion. In 2009, the values were US$21.48 billion and US$10 billion in 2009, respectively.

 

The low %age of FDI capital disbursement distressed many foreign investors. In 2009, the number of countries investing in Vietnam plunged. Only four out of 89 countries and territories continued with their new investment projects in Vietnam in 2009.

 

According to Mr Dang Xuan Quang, Deputy Director of Investment Department under the Ministry of Planning and Investment, the infrastructure systems like electricity, water, traffic, seaport and other facilities are still very weak. Site clearance still encounters many difficulties. Although Vietnam has joined the WTO for more than 2 years, it still lacks instructions on conditional investment sector. According to the law, there are some 70 conditional investment areas for which there are no instructions.

 

In fact, in the past time, Vietnam has adopted a number of solutions to improve the investment environment. Most recently, in the report submitted to the Prime Minister, the Foreign Investment Agency proposed eight measures to attract FDI capital, focusing on law and policy; planning; infrastructure improvement; human resources management , investment promotion ; with an aim to draw the new wave of investment when the climate is over.

 

Creating a healthy business environment and promoting social advantages are very important for the development of the economy. In recent years, Vietnam has successfully carried out trade and investment promotion activities. Economic expert Le Dang Doanh said: “In 2010, the world economy recovers, Vietnam can expect an increase in FDI. If Vietnam wants to attract more FDI, it needs to improve the infrastructure and the investment environment. If the infrastructure is poor, seaports are incapable, traffic congestions are frequent and electricity supply is instable, it will be very difficult to attract investors.”

 

One of the areas has not attracted much FDI capital is agriculture. According to the statistics released by the Foreign Investment Agency, over the past 20 years of enacting FDI attraction policies, the number of FDI projects in agriculture, forestry and fisheries is very small. In particular, in 2009, agriculture accounted for less than 1 % of FDI value injected into Vietnam.

 

Vietnam is an agricultural country but the investment capital for this sector is the lowest; thus failing to reflect the potential of this sector. The main reason is, according to Dang Xuan Quang, the Vietnamese agricultural production is still small and scattered. Besides, unguaranteed seedling and techniques also keep foreign investors away from the agricultural sector. According to the Foreign Investment Agency, out of 839 FDI projects with registered capital of US$21.48 billion in 2009, only 16 investment projects with a registered capital of US$84.9 million were involved in agriculture, forestry and fisheries.

 

Mr Do Duc Dinh, Director of Vietnam Socioeconomic Research Centre, said: The agricultural sector of Vietnam has a lot of potential. To attract foreign capital, Vietnam needs to have the land fund large enough to implement key agricultural and hi-tech projects, create favourable conditions in policy and tax for agricultural investors.