HCM CITY (VNS)— It is time for a new approach to foreign direct investment (FDI), one that will find solutions that improve FDI efficiency for the broader benefit of the country's economic growth, experts said at a workshop held in HCM city yesterday.
"Localities should focus their attention on ways to attract FDI in order to implement their socio-economic development plans effectively and set up relations between domestic and FDI businesses. In this way, local firms can effectively participate in the global value chain," said Prof Nguyen Mai.
"Regarding markets and partners, provinces and cities should concentrate on small to medium-sized enterprises operating in Viet Nam and create a favorable environment to attract more trans-national corporations (TNCs) from the US, the EU, Japan, Korea and elsewhere," he told participants at the event.
The focus of the event was ways to enhance the efficiency of FDI into Viet Nam. It was organised by the Ministry of Planning and Investment in coordination with the weekly Viet Nam Investment Review.
He added that making Viet Nam a more attractive investment destination starts with analysis of the foreign policies of each country and the global strategy on trade and investment of each economic group.
He also wants to implement public-private partnerships (PPP) for technical infrastructure projects, and new investment forms like mergers and acquisitions (M&A) and NEM (non-equity modes).
We need to amend and supplement policies affecting FDI projects by giving incentives based on not only sectors and areas, but also territorial regions, he said.
"While many ASEAN countries have improved their investment environment, making them attractive to world FDI, some elements of the investment climate in our country, especially the legal system and administrative procedures, are yet to meet expectations of large investors," he noted.
Most importantly, he said, ministries, agencies and authorities must recognise the inability of the administrative apparatus to improve the investment environment – in particular administrative procedures that guide and support FDI businesses in carrying out projects and overcoming difficulties. Once we recognise this, we can hope to find quicker and more effective solutions to issues posed by foreign investors and FDI enterprises.
"It is necessary to renovate the state management of FDI to make it more harmonious and efficient," he stated.
The Ministry of Planning and Investment is (MPI) in the process of amending and supplementing the laws on investment and enterprise, which will involve a number of provisions in other laws.
To ensure a united viewpoint among ministries and agencies, we must follow the instruction of the Prime Minister, who held a meeting on the topic of foreign investment. In it, he stated, "New policies and laws must create more favourable conditions and provide more profits for investors and businesses."
Meanwhile, Do Nhat Hoang, director of the Foreign Investment Department under the MPI said that viewpoints and orientations on FDI attraction were clearly defined in the government's Resolution No103/NQ-CP dated August 29, 2013.
One of the new strategies was to select high quality and added-value projects that use modern and environmentally friendly technology, particularly in the fields of information technology information and biotechnology serving agriculture, infrastructure development, high-quality human resources training, research and development, and modern services.
Another orientation is to attract large-scale projects with products capable of joining global value chains of transnational corporations, thus building and developing a system of support industries and businesses.
Other suggestions were to encourage industrial projects to shift from outsourcing to production; select large and prestigious investors to invest in developing the financial market whilst simultaneously paying attention to small and medium-scale projects.
Hoang said the resolution also emphasises encouraging, facilitating and strengthening links between FDI businesses and domestic enterprises.
Vo Quang Hue, managing director for Robert Bosch Viet Nam raised the issue of support industries.
He said that support should be understood as both assisting production facilities operating in Viet Nam, as well as supporting exports to regional and global markets.
He explained that if it were only serving only those in Viet Nam, it would be a very small-scale industry.
According to Christian Kamm, president of Kamm Investment Inc, research has proven that countries with a long-standing policy of promoting foreign direct investment usually are the greatest beneficiaries of FDI.
"In the case of Viet Nam, the government has been cautious to change laws and regulations in investment law. It is clear that this has had a detrimental effect on foreign investment. In some cases investors probably eliminated Viet Nam very quickly from their investment options," Christian noted, adding that there is remains a question mark over the necessity to change current investment law.
"Most developing countries share similar, though not identical, labour costs. Labour costs are often considered a major determining factor in deciding an FDI destination," he told participants.
Recently, Samsung announced it will shift a great deal of its China-based handset production to Viet Nam from China in order to "maintain its margins". This multi-billion dollar investment appears to be centrered solely around wage costs, but is that the reality, he asked.
Geographically, Viet Nam is a favourable country. It's located in a region of a 1.9 billion person-strong emerging middle class (this is by far the largest and most lucrative future consumer market in the world) which presents a clear advantage.
"Viet Nam is also forging ahead with its involvement in the Trans-Pacific Partnership (TPP) which will provide essentially free trade between member countries, representing over 70 per cent of all consumers in the world.
"Maybe Samsung has noted a shift in trading power away from China, and is intending to take advantage of the emerging opportunity in Viet Nam.
"Viet Nam's interest and involvement in the regional ASEAN Economic Community (AEC) will also provide regional trade assurance and eliminate duties.
"But what has the country's commitment to the TPP and AEC meant to foreign direct investors? A clear desire in Viet Nam, to promote greater FDI and the stability (politically, economically, and socially) to make the conditions favourable to FDI growth.
"It is easy to criticise any government decision that may affect FDI. What may be appreciated by some critics is a longer term view, a more balanced approach to FDI. Still others may deem a balanced approach as unnecessary," he said.
"It is my belief that the most significant component should be desire and progress towards inclusion in trade agreements and regional and worldwide partners.
Only then are countries like Viet Nam perceived to be stable, politically and economically. It is also my belief that although the investment laws in Viet Nam require updating to meet the current investment environment, the larger focus needs to be on vital partnerships like the AEC and TPP. As Viet Nam continues to move toward these partnerships, balanced growth in FDI will become a reality over the short and medium term."
Over the course of 25 years of FDI, the increased capital has contributed positively to the country's growth. By the end of 2013, there were over 15,000 valid projects that totalled US$219 billion in registered capital, of which $107 billion were disbursed. — VNS