Vietnam Needs to Attract FDI Selectively

 

FDI has contributed significantly to Vietnam economy in terms of capital scale, the technology transfer, international payments, export development and international integration. Currently, FDI projects involve in all oil and gas, washing machine, refrigerator, air conditioner and automobile production and make up 60 percent of steel sheet production, 33 percent of electronic production, 76 percent of medical equipment, and 28 percent of cement. Moreover, FDI also has a high proportion in mainstream industry as 42 percent of shoe industry, 25 percent of garment industry, and 84 percent of electronics, computers, and other electric components.

 

According to the assessment of the Foreign Investment Department and the Ministry of Planning and Investment, foreign investment projects have added an important source of capital for investment in socio- economic development. FDI has contributed to increasing the state budget and exceeded USD1 billion in 2005 and it was USD 2.47 billion in 2009. It has also generated employment and income stability for over 1.7 million direct employees, not including other indirect employees… On the economic structure, FDI has concentrated in manufacture sector. Heavy industry was ranked first with about 21 percent of the total registered FDI, followed by construction and hotel, accommodation. Besides, agriculture, fishery, and forestry accounts for only about 6 percent of the total committed capital, though Vietnamese Government has adopted many preferential policies to encourage FDI in this sector.

 

According to Dr. Nguyen Mai, Chairman of the Association of foreign invested enterprises (VAFIE), if Vietnam attaches importance of the number of foreign investment projects in period of 1997-2010, it shall be a transferring period to new phrase, getting quality and efficiency as key criteria. At the same time, managers need to shift from primarily oriented jobs to high technology, industrial support, senior services, modern healthcare, infrastructure, and human resources training. However, to the right direction, the emerging issues that investors are not satisfied and not bring sustainable development to Vietnam should be addressed immediately.

 

Representatives of Foreign Investment Department said that although FDI has contributed USD 10 billion to state budget, it is still restrictive and not really commensurate with the amount of investment capital. In the investment process, a number of FDI also causes environmental pollution or the import of obsolete technology into Vietnam and have no source technology transfer to Vietnam.

 

A number of supporting industry projects or high tech projects have obtained inadequate results and many industrial parks unused capacity such as Hoa Lac high tech industrial zone… Exports from Vietnam are mainly processed, low value due to advantage of cheap human resources. Besides, many localities of Vietnam, due to hasty in attracting foreign investment but lack of strategy, have run to records, quantity, not concentrated in quality leading unbalance of economy overall. 

 

Such problems have not promoted FDI to develop strength from both localities and businesses. Therefore, there should be strategic and synchronous solutions in order to encourage FDI stock its full potential for more. According to Mr. Do Nhat Hoang, Director of Foreign Investment Department, to overcome such limitations, there should be solutions for quality control such as foreign laws, policies and measures on the planning of the investment promotion, infrastructure improvement, human resources improvement, state management, administrative procedures, transparency of customs officials, and improvement in embezzlement, corruption, authoritarianism.

 

Mr. Hoang also said that Vietnam need to issue preferential policies to encourage investment specifically but need to be synchronized in such areas as urban development, housing development, social housing for people with low income, infrastructure development… In particular, no license for obsolete technology projects, projects with bad impacts on environment, but careful evaluation for projects through land use, land allocation as project progress. Mr. Hoang also added that we should consider the investment rates on land, including land in industrial zones. In addition, related ministries and departments need to improve the role of project appraisal stage, setting standards, technical barriers to stop obsolete technology projects or projects with environmental impacts, and have strategies through FDI projects to improve the national technological capacity. Perhaps, this period, Vietnam has been really shifting to attract investment selectively. Projects granted investment certificates will also be closely monitored in progress so that they can bring economic efficiency for both investors and Vietnam.