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Enhancing Foreign Investment Efficiency (Updated : 28/12/2011)

Foreign Investment Department and Vietnam’s Association of Foreign Invested Enterprises (VAFIE) recently organised a seminar on “Assessment of foreign investment efficiency and measures to boost FDI disbursement” in Ho Chi Minh City. At the seminar, many issues related to foreign investment activities, especially the issue of FDI disbursement during recent time were analysed.

According to the information provided by the Foreign Investment Agency – Ministry of Planning and Investment, Vietnam has so far attracted 13,496 FDI projects with the total valid registered capital of US$195.9 billion. 65 percent of the above projects have contributed capital. The realized capital is over US$88.2 billion, accounting for 43.2 percentage of the registered capital.
 
FDI has been playing an important role and placing large impact on the growth of Vietnam’s economy in many aspects. This is an important additional source of fund for investment and development fund, meeting the demand for economic development, helping to transfer the economic structure, raising industrial production capacity and boosting technological transfer. FDI also makes a significant contribution to the state budget, import – export value and macro balances; impulses public administrative reform and transparency of Vietnam’s investment environment, helping Vietnam to have greater integration into global economy…
 
Current situation of FDI disbursement
Figures from VAFIE show that during the past years, FDI has played an important role in stimulating economic development. However, there remain issues needed to be solved regarding the disbursement of FDI.
 
According to VAFIE’s report, as of the end of 2010, total registered FDI reached US$216 billion. Meanwhile, the realized amount only reaches US$77 billion. US$179 billion remains yet to be disbursed and 50 percentage of which is forecasted to have no possibility of being so. The disbursement rate compared with registered FDI in five years of 2006 – 2010, except 2008, is 18 percent since many projects have registered capital of billions of dollars. However, many of which have had investment licences withdrawn. There are cases in which incapable investors take advantage of local authorities’ policies on giving preferential treatment to investors to have investment licences granted. They, however, have not implemented such projects, which causes large waste. So far, there have not been any punitive sanctions.
 
Slow FDI disbursement is also due to both subjective reasons and objective reasons. The former is the global economic crisis which makes investors suffer from domino effects. The latter comes from state administrative agencies, including slow clearance pace or cumbersome administrative procedures…
 
Although the disbursement pace is still limited, FDI in recent five years is still evaluated by VAFIE to be maintained at a relatively sustainable rate, even in difficult economic period. This reflects a fact that the investment environment in Vietnam is still appealing to foreign investors, especially those who are doing business in Vietnam.
 
Solutions for more FDI attraction
The Ministry of Planning and Investment is assigned to evaluate the current situation of FDI and to propose policies and solutions to improve the quality of FDI in 2011 – 2020 period. Accordingly, the Minister of Planning and Investment is providing instruction to the Foreign Investment Department and some other departments, the National Forecast Center and the VAFIE to co-develop new policies and solutions as well as revise and supplement to better the legal framework related to FDI.
 
According to VAFIE, there will be four guidelines for FDI policies, including: Firstly, Quality and efficiency of FDI projects need to be assessed so that it can be in line with Socio-Economic Strategy of the nation, each locality and each industry…
 
Secondly, sustainable development and establishment of a low carbon economy require stricter regulations towards FDI since unfriendly environmental and high carbon disposal industries have been moved to our country by some foreign investors.
 
Thirdly, it is vital that FDI in the new period prioritize high-tech industries and modern services which create breakthroughs in technology for the nation.
 
Fourthly, highly skilled workers will replace labor intensive FDI. The fast movement from unskilled labour to highly-skilled labour is necessary to adjust to a new development period.
 
More and more FDI continues to be poured into Vietnam and Vietnam also needs this capital source to guarantee its economic growth. Successful and failure lessons in market economy, global integration among which is FDI are valuable assets for Vietnam to be smarter in receiving international fund effectively and developing sustainably.
 
Quoc Hung
 
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