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Planning minister calls for better FDI policies

Update: March, 16/2012 - 10:23

HA NOI — Viet Nam should continue to improve policies for foreign direct investment (FDI), said Minister of Planning and Investment Bui Quang Vinh at a conference in Ha Noi yesterday.

Altering and managing FDI capital sources would be a critical part of restructuring the domestic economy and aiming at efficiency, productivity and quality, he said.

This plan was in accordance with the Government's instruction to strengthen FDI implementation and management in the coming years, he added.

Do Nhat Hoang, director of the ministry's foreign investment agency, urged sectors to call for environmentally-friendly projects that utilise modern technology and to generate competitive products that can contribute to the global production network and value chain.

He highlighted fields such as technology, mechanics, communications, pharmaceuticals, biology and all areas that use clean energy and new materials.

He suggested that changes be made to regulations and policies governing investment and business, land management and environmental protection in addition to FDI promotion.

Hong Sun, general secretary of the South Korea Chamber of Commerce and Industry in Viet Nam, told Bao Dau tu (Vietnam Investment Review) that those were right steps, but the country should not attempt to tackle all areas at once.

"We need time, we need support industries," he told the newspaper, adding that Viet Nam should receive an influx of capital providing that investment projects did not harm its socio-economic development.

He also suggested Viet Nam select multi-national corporations as they are often accompanied by support-sector firms.

Phan Huu Thang, director of the University of Economics and Business' FDI research centre, said labour force training would be of special importance in order to meet the increasing demands of FDI enterprises and especially hi-tech companies.

"Our goal is that, by 2020, vocational training should meet the demand of the labour market in terms of numbers, quality and structure—and even reach the level of developed countries in the world," said Nguyen Ngoc Phi, Deputy Minster of Labour, Invalids and Social Affairs.

Duangdej Yuaikawam-dee, an official from Reed Tradex Co (an ASEAN exhibition organiser) said the Government should consider investments more carefully and consider the country's advantage of cheap labour.

He said there were now two groups of investors: one group brings advanced technology to Viet Nam looking for co-operation and investments, and the other brings outdated technology wishing to take advantage of cheap labour.

"Viet Nam should be cautious in selecting FDI projects and have suitable policies to attract quality FDI inflows," he said.

"Government agencies should pay more attention to social polls and enterprises' opinions about matters relating to their function and authority," said Nguyen Mai, former vice chairman of the State Committee for Co-operation and Investment.

"They should be truly attentive listeners to help investors and FDI firms solve their problems most promptly and efficiently," he said.

Conference participants said the Government should create a more transparent, even-handed and efficient business environment and improve administrative procedures to attract more investors.

They agreed that in the long term, ministries, sectors, localities and business communities should boost co-operation in every investment phase to ensure a competitive investment environment and maximise the efficiency of FDI inflows.

The Ministry of Planning and Investment said it was drafting a new document to revise Government Decree No 108/2006/ND-CP issued in 2006, which guided the Invest-ment Law.

At the end of February, the country had 13,530 operating FDI projects with a total registered capital of nearly US$200 billion, conference organisers reported in a press release.

Japan, Singapore and South Korea had the largest capital value in Viet Nam, while Ha Noi, HCM City and the southern province of Ba Ria-Vung Tau were leading localities in attracting FDI.

It is a common misconception that foreign invested enterprises (FIEs) with a stable source of capital can remain healthy and enjoy export growth in the midst of global economic difficulties.

According to a recent survey on FIEs conducted by the Viet Nam Chamber of Commerce and Industry (VCCI), the scale of FIEs operating inside the country was relatively small compared to international standards.

About 63 per cent of FIEs possess investment licences with capital of less than US$2.5 million, while only 13 per cent had investment capital of over $25 million.

Enterprises from East Asia such as South Korea, Taiwan, Japan and mainland China accounts for 66 per cent of the survey.

Viet Nam had the advantage of cheap labour costs, yet the FIEs had relatively small workforces, with 75 per cent employing less than 300 personnel, and 37 per cent with less than 50, the survey said.

"Most enterprises are relatively small in scale and often focus on exports as sub-contractors for multinational corporations," the VCCI said.

Key findings showed that although FIEs achieved higher revenues last year, they were less optimistic about business prospects for the near future.

"The country has so far attracted only foreign investment in the manufacturing sector with low cost and low added value," the VCCI said. Meanwhile, high quality foreign investment projects required the enforcement of intellectual property rights, better control of corruption and qualified human resources, the chamber added.

According to the Ministry of Industry and Trade, FIE export revenue – excluding oil – is nearly $8.6 billion, accounting for more than half of the total exports in the first two months this year. This is noteworthy, as commodity consumption is still at a difficult stage.

The availability of industrial parks and raw materials are alluring to foreign investors. The country has been warned by economic experts that FIEs would come to take advantage of cheap labour and exploit its natural resources.

However, the lack of connection with the domestic private sector had limited the widespread effects of technology and management experience absorption, said Jim Winkler, director of the USAID-funded Viet Nam Competitiveness Initiative project. — VNS

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