Foreign-invested enterprises are more likely to contribute to capitalformation, tax revenues and job creation when compared to State-ownedenterprises and the domestic private sector, according to a new reportrolled out by the UN Industrial Development Organisation (UNIDO).
UNIDO's Vietnam Industrial Investment Report 2011 released also at aMar. 11 workshop hosted by the Foreign Investment Agency saidforeign-invested enterprises (FIEs) are better able to establishthemselves in both high-technology industries, such as computers,electronics and optical products and low-tech industries, such asleather goods manufacturing.
The report was based on asurvey of 1,494 enterprises operating in industry and construction, withFIEs accounting for 58 percent of respondents.
FIEs onaverage generate more employment, grow at higher rates, operate athigher rates of capacity utilisation, and are more profitable, thereport said. Most manufacturing firms in Vietnam arelabour-intensive and that has had a positive impact on employmentgeneration.
The report faulted FIEs, however, fora heavy reliance on imported raw materials and for engaging in theproduction of low value-added products geared primarily to exportmarkets.
Since 2008, investment from the foreign-investedsector has outpaced investment from the domestic private sector. Therate of disbursements has become less volatile and been on a relativelystable upward trend since 2006, the report said, suggesting that the gapbetween registered and disbursed foreign investment might be decreasingover time.
WTO accession was expected to have asignificant impact on international trade patterns, particularly interms of diversifying export products and expanding export markets.However, overall exports remain underpinned and led by theforeign-invested sector, with a concentration in labour-intensivemanufacturing.
The majority of export firms remain heavilydependent on imported inputs, with FIEs complaining of a generalshortage of input suppliers that meet the requirements and demands ofenterprises. This seems to be a common challenge to the entireVietnamese economy.
UNIDO's survey findings also seemed tosuggest that the growth impact of FDI was less positive due to theprobable incidence of transfer pricing.
At the workshop,UNIDO experts suggested that, to help improve the quality of foreigninvestment, the role of the Foreign Investment Agency, an agency of theMinistry of Planning and Investment, should be enhanced to includeinvestment promotion and monitoring.
Investment promotionneeds to focus on attracting more support industries to Vietnam in abid to enable more industrial subcontracting and increase the localcontent of manufactured goods.
UNIDO experts said thatexisting investors are crucial in promoting new foreign investment intoVietnam . Support services therefore serve a dual objective oftriggering re-investment by existing investors and encouraging theirrole as ambassadors to promoting new investment.
They alsosaid that the country needs to reassess its economic growth model, interms of a thorough analysis of the relationship between exportgeneration, employment creation, added value and productive efficiencyin manufacturing industries.
Policymakers needs toundertake an in-depth evaluation of the performance of FIEs operating inindustrial zones and the economic benefits generated by incentiveschemes provided to these enterprises, while they also needs tore-assess the economic benefits of investment incentives granted toFIEs, seeking to target manufacturing sectors with high added-valuepotential./.
UNIDO's Vietnam Industrial Investment Report 2011 released also at aMar. 11 workshop hosted by the Foreign Investment Agency saidforeign-invested enterprises (FIEs) are better able to establishthemselves in both high-technology industries, such as computers,electronics and optical products and low-tech industries, such asleather goods manufacturing.
The report was based on asurvey of 1,494 enterprises operating in industry and construction, withFIEs accounting for 58 percent of respondents.
FIEs onaverage generate more employment, grow at higher rates, operate athigher rates of capacity utilisation, and are more profitable, thereport said. Most manufacturing firms in Vietnam arelabour-intensive and that has had a positive impact on employmentgeneration.
The report faulted FIEs, however, fora heavy reliance on imported raw materials and for engaging in theproduction of low value-added products geared primarily to exportmarkets.
Since 2008, investment from the foreign-investedsector has outpaced investment from the domestic private sector. Therate of disbursements has become less volatile and been on a relativelystable upward trend since 2006, the report said, suggesting that the gapbetween registered and disbursed foreign investment might be decreasingover time.
WTO accession was expected to have asignificant impact on international trade patterns, particularly interms of diversifying export products and expanding export markets.However, overall exports remain underpinned and led by theforeign-invested sector, with a concentration in labour-intensivemanufacturing.
The majority of export firms remain heavilydependent on imported inputs, with FIEs complaining of a generalshortage of input suppliers that meet the requirements and demands ofenterprises. This seems to be a common challenge to the entireVietnamese economy.
UNIDO's survey findings also seemed tosuggest that the growth impact of FDI was less positive due to theprobable incidence of transfer pricing.
At the workshop,UNIDO experts suggested that, to help improve the quality of foreigninvestment, the role of the Foreign Investment Agency, an agency of theMinistry of Planning and Investment, should be enhanced to includeinvestment promotion and monitoring.
Investment promotionneeds to focus on attracting more support industries to Vietnam in abid to enable more industrial subcontracting and increase the localcontent of manufactured goods.
UNIDO experts said thatexisting investors are crucial in promoting new foreign investment intoVietnam . Support services therefore serve a dual objective oftriggering re-investment by existing investors and encouraging theirrole as ambassadors to promoting new investment.
They alsosaid that the country needs to reassess its economic growth model, interms of a thorough analysis of the relationship between exportgeneration, employment creation, added value and productive efficiencyin manufacturing industries.
Policymakers needs toundertake an in-depth evaluation of the performance of FIEs operating inindustrial zones and the economic benefits generated by incentiveschemes provided to these enterprises, while they also needs tore-assess the economic benefits of investment incentives granted toFIEs, seeking to target manufacturing sectors with high added-valuepotential./.
