Updated  
November, 18 2011 10:12:02

Investment incentives fail to attract foreign capital

Women work on a motorbike spare part production line at Thai wholly-invested TS Co Ltd in Ha Noi's Noi Bai Industrial Park. A shortage of support industries and a lack of skilled workers have deterred foreign firms from investing in Viet Nam. — VNA/VNS Photo Huy Hung

Women work on a motorbike spare part production line at Thai wholly-invested TS Co Ltd in Ha Noi's Noi Bai Industrial Park. A shortage of support industries and a lack of skilled workers have deterred foreign firms from investing in Viet Nam. — VNA/VNS Photo Huy Hung

HA NOI — Changes in the world economy have positively impacted foreign investment in Viet Nam, but the country still needs to improve its investment climate to capitalise on this trend, experts said.

Recent natural disasters in Thailand, Japan and China have caused investors, especially those in the electronic and manufacturing sectors, to move their resources to other countries, including Viet Nam.

According to a recent survey of 346 respondents conducted by Nikkei Business Online, Viet Nam has the potential to attract significant investment from Japan, with 60 per cent responding that Viet Nam would be one of best places for new production facilities.

However, Viet Nam's investment incentives were not sufficient to attract foreign capital and technology, said Ngo Van Tru, deputy head of the Heavy Industry Depart-ment under the Ministry of Industry and Trade (MOIT).

He warned that slow progress on Vietnamese infrastructure construction would pose a challenge to attracting foreign investment in the future.

Investors also cited weakness in supporting industries and lack of skilled workers as obstacles to luring foreign capital.

Steep interest

Supporting industries are often composed of small and medium-sized enter-prises, which tend to struggle more in difficult economic periods.

They require medium – and long-term capital and sites for production, but they are deterred by steep interest rates on loans, expensive land rent and the high costs of importing technology and paying salaries.

Phan Dang Tuat, head of MOIT's Industrial Strategy and Policy Institute, said that supporting industries have not received enough State assistance and therefore have not been strong enough to break through.

Preferential policies for such enterprises have just released and there have not yet been relevant projects to license, Tuat said.

Do Nhat Hoang, director of the Foreign Investment Agency under the Ministry of Planning and Investment, said that in reality there are many foreigners coming to check out investment options in Viet Nam, especially in the high-tech, support industry and infrastructure sectors.

However, these investors have not disbursed their capital because they needed more time to prepare for their investment activities in Viet Nam, he explained.

Hoang expected that foreign investment would increase sharply in the near future.

Viet Nam attracted US$11.3 billion in foreign direct investment (FDI) during the first 10 months of this year, representing a year-on-year decrease of 22 per cent. In addition, FDI disbursement surged by 1 per cent, hitting $9.1 billion, according to the Ministry of Planning and Investment. — VNS

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