Higher quality FDI focus for Vietnam
Approaches to FDI are changing in Vietnam, as part of efforts to attract investment of higher quality.
Vietnam is working on amending the Investment Law and Enterprise Law
as part of its institutional reforms to better attract and manage
foreign direct investment.
In addition to legal changes, new
approaches to the issue are vital, said participants at the FDI workshop
in Ho Chi Minh City.
MPI Deputy Minister Nguyen Van Trung told
the workshop that Vietnam has shifted foreign direct investment
attraction efforts to green technology, hi-tech, and capital-intensive
sectors, and now discourages polluting FDI projects and firms employing
obsolete technologies.
The Vietnamese Government last August
issued Resolution 103 on measures to improve the efficiency of FDI
attraction, use and management in the coming period. The resolution
confirmed that FDI remains a key resource for the Vietnamese economy,
and the foreign-invested sector is a significant element in the domestic
economy but Vietnam needs to better deal with signs of transfer pricing
and other forms of tax evasion.
Quach Ngoc Tuan, Deputy Director
of the MPI’s Department of Legislation, said the draft revised
Investment Law was compiled on the basis of continuing to improve the
investment environment, and to raise the quality and efficiency of
investment attraction. The draft aims to improve the law’s provisions to
solve investor difficulties, especially the application of regulations
on investment conditions and procedures. It also aims to improve the
efficiency of state administration on investment activities and complete
the decentralisation of this task.
He added another goal is to
ensure Vietnam meets its commitments to further open the market and
liberalise investment in line with the international agreements to which
Vietnam is a signatory.
Seck Yee Chung, a partner at law firm
Baker & McKenzie Vietnam, said that while Singapore is a small
island it remains very open and has achieved great success in human
capital development. His advice for Vietnam’s FDI attraction efforts
included embracing human capital development, and the new Investment Law
should provide a level playing field to foreign invested enterprises
(FIEs) and Vietnamese enterprises. Openness is another factor for
attracting FDI, he stressed.
Dr. Christian Kamm, President of the
US-based Kamm Investment Inc., said research across the world has
proven that countries with a long standing policy of promoting FDI are
the great beneficiaries of FDI. “It’s easy to see that countries which
do not place attracting FDI at the top of their priorities through the
formulation of laws and regulations conducive to attract FDI will not
normally attract a great deal of it,” he said.
However, Kamm
stressed one important consideration that any country must take a
balanced approach to FDI. He said “large apparitions” in FDI from year
to year would only result in a highly uneven economy which would further
cause large fluctuations in currencies, GDP, trade, inflation and
deficit numbers.
Likewise, FDI expert Prof. Nguyen Mai said it
is necessary for Vietnam to conduct a sound assessment on the role of
FDI today. He added it is necessary to have a new approach to FDI, to
correctly assess the impact of FDI, and address opinions that FDI has
caused some obstacles to local businesses and Vietnam should shift its
focus to promoting local enterprises.
As for policy, the former
deputy chairman of the former State Committee for Co-operation and
Investment (now the MPI), emphasised that it is necessary to amend and
supplement preferential policies for FDI projects in the principle of
offering incentives based on sectors and regions.
Mai said a
survey on more than 8,000 Vietnamese private firms and 1,540 FIEs
announced last March by the Vietnam of Chamber of Commerce and Industry
showed that the local and foreign firms shared a view that
administrative procedures in business registration, tax, customs, land,
environment, construction and some others were bottlenecks that should
be removed to improve Vietnam’s investment environment.
MPI
Minister Bui Quang Vinh has continuously reiterated that the ministry
would try its best to better attract and manage FDI in line with
Resolution 103.
He told Vietnam Investment Review that the
Vietnamese Government has been aware that institutional reform remains
key to further success, and the reform aims to continue to improve the
investment environment. One of the goals of institutional reform is to
create a level playing field for state-run and private companies, for
FIEs and local firms. Another is equality for all enterprises to get
access to resources. Institutional reform includes many issues that
relate to the investment environment one of which is increasing
transparency.
Regarding the identification of FIEs and Vietnamese
businesses through the law, the minister said such identifications are
just for better administration because all the firms operate under
Vietnamese laws, pay taxes and perform their corporate duties.
About the identification issue, Dr. Nguyen Dinh Cung, acting director of
the Central Institute for Economic Management, told the workshop that
regulations need to simply determine what foreign investors are allowed
to do and what other regulatory restrictions are in place regarding
their activities.
“Normally, in many countries, foreign investors
are prohibited from or restricted to investing in several fields in
accordance with international commitments and national laws. Therefore,
defining the concept of foreign investors is essential,” he said.
Regarding attracting FDI based on quality or quantity, he proposed
Vietnam combine the two approaches. A new Investment Law would specify
foreign investment activities Vietnam needs to attract and decide
appropriate preferential policies. Other foreign investment activities
should be considered “natural” activities with similar attraction
measures as domestic investment activities.
Do Nhat Hoang,
Director of the Foreign Investment Agency said orientations on FDI
attraction in the future are clearly stated in the Resolution 103, and
include selecting high quality and added value projects using modern and
environmentally friendly technologies.
In terms of better FDI
administration, Hoang said intensifying the inspection and supervision
of investment activities is a must. The investment certification
agencies must strengthen inspection and supervision of foreign-invested
projects, the licensing process and post-licensing management.
To
overcome overlapping and inefficiencies in investment promotion
activities over the past period, the government has assigned the MPI to
annually and periodically issue sets of criteria guiding ministries,
agencies and provinces to draft their investment promotion plans. The
plans must be sent to the MPI for an overview and these activities need
greater cooperation to avoid overlapping.-VNA