From the perspectives of economists, acquiring finance from foreign sources to leverage overall economic development is a good strategy helping strengthen Vietnam's economy. However, to make it real, Vietnam needs stronger institutional reforms regarding to legal environment, increasing capacity of the public administration, and efficient use of the capital. It also is the main content of the workshop "Improving FDI's attraction and efficiency of using foreign capital", which was organised by the Ministry of Planning and Investment in collaboration with the Vietnam Association of Foreign Invested Enterprises (VAFIE).
FDI- a great resource
According to Dang Huy Dong, Deputy Minister of Planning and Investment, to fulfill the present- to- 2020 plan of directing Vietnam to be a basic industrial country towards modernisation, Vietnam needs to set up goals to attract more resources, especially the foreign capital. According to Dang Huy Dong, in more than 25 years of "Doi moi" ( renovation) since the National Assembly of Vietnam first promulgated the Law on Foreign Investment in Vietnam in 1987, the FDI inflows have become an important driving force to promote process of international integration and restructure Vietnam's economy. In addition, the FDI has been also actively contributing to the development and innovation of technology, basically changing the international trade balance, increasing the budget revenues, developing high-quality human resources and directly creating jobs.
In addition, the FDI pushes the government of the host country to fulfill the legal framework, improve business and investment environment and enhance competitiveness to gradually help Vietnam step by step to participate in the global value chain.
According to Do Nhat Hoang, Director of Foreign Investment Agency, Ministry of Planning and Investment, as of April 20, 2014, there were 16,323 FDI projects of 101 countries and territories in force, US$237.6 billion of total registered capital, and US$116 billion of total reimbursed capital. In particular, the investment in manufacturing and processing industry accounts for 54 percent, 20.8 percent in real estate, and 1.4 percent in agriculture, forestry, and fisheries. The biggest investors come from Japan, South Korea, Singapore, and Taiwan. The total investment of the biggest investors account for 80 percent of total registered capital.
Hoang said that despite its advantages, the FDI also reveals many shortcomings such as limited FDI in infrastructure development, human resources, supporting industry and the legal system and overlapping policies have not supported each other; besides, the disputes have taken place among policies. In addition, there have been lacks of regulations, specific guidance on implementation of WTO commitments and investment conditions; some provisions are inappropriate, which include preferential investment policies, weak labour and management of foreign workers, shortcomings in technology and technology transfer, complex regulations on merging and acquisitions of companies, less attractive policies on supporting industry and unclear dispute settlement.
Need to fix Investment Law and Enterprise Law
Sharing concerns about this issue, Prof Nguyen Mai, Chairman of the Vietnam Association of Foreign Invested Enterprises, said that the amendments on two important laws need to be put in the context of Vietnam's economy, which has initial signs of recovery but still growing unstably with average annual growth rate of 7 to 7.5 percent. Therefore, in the future, there should have institutional reforms, which are strong enough to overcome the existing shortcomings and create the basis for economic development with faster and more sustainable growth. Accordingly, the amendment of the Investment Law and Enterprise Law should address two main above issues. There must be a formation of a clear legal framework to empower the businesses to implement their ideas, initiatives and investment. Besides, there have been many loopholes in the law, which neither protects the legal business operations nor prevent the illegal business activities.
According to Prof Nguyen Mai, the revision of the two main laws should mention to the freedom of business activities, provided that those activities are not prohibited by law. However, due to the context of international integration and the law adjusted for both of domestic and foreign entities, the lawmakers should also review the laws of which these principles need to guarantee incentives for foreign investors and consistency with the government’s management. Another aspect is that the Investment Law and the Enterprise Law need to "open" up to the concept of "freedom of trade and investment" in the trade and international investment activities to early eliminate the tariff and non-tariff barriers as well as harmonise the customs procedures across borders.
To add more information, Do Nhat Hoang said, in the future, the Vietnamese government aims to attract foreign investment projects which qualify for list of features such as high-quality, added value, environment –friendliness, large scale, creation of competitive products, encouragement and strengthening the linkages among businesses; besides, the government will attract foreign investment based on investment sectors and advantages of each region and industry to improve investment efficiency of local and regional areas in correspondence with the general plan to ensure total benefits of the nation and restructure the economy towards the new growth model.
Do Nhat Hoang cited that since then, most of the FDI projects in Vietnam have been small projects; those with a registered capital of US$100 million to US$500 million only account for 1.51 percent; those with a registered capital of US$500 million to US$1 billion account for only 0.19 percent and those with a registered capital of over US$1 billion account for 0.2 percent. Therefore, to enhance competitiveness to attract FDI, Vietnam needs more strong determination with particular emphasis on administrative reform, infrastructure development, and training of high quality human resource.
Anh Phuong
Vietnamese
