On the threshold of an FDI forum to be organised by the Ministry of Planning and Investment this week, Minister Bui Quang Vinh talks with Vietnam Investment Review about the significance of the continued attraction of FDI to Vietnam, and how to better compete in the global market.
* Over the past 25 years, foreign direct investment has made substantial contributions to Vietnam’s socio-economic development, and FDI inflows have reached huge amounts. However, FDI is also said to have caused obstacles to local businesses and Vietnam should shift its focus to promoting local firms. What do you think about this?
I don’t agree with that point of view and it needs to be seriously reconsidered. Vietnam has to make more efforts to attract more FDI. The important thing is to properly select foreign-invested enterprises (FIEs), not to distinguish FIEs from local enterprises, because FDI is a vital component of the economy. All countries compete to attract FDI, even the Europeans and the US. Southeast Asian countries like Indonesia, Malaysia and Thailand all do this.
Regarding obstacles, I think it’s how to administrate FDI that counts. For example, it’s a must to prevent transfer pricing and tax evasion. Actually, distinguishing FIEs from local businesses is just for administration because they all operate under Vietnamese laws, all pay taxes and all perform corporate duties including CSR. Therefore, I think we should not distinguish foreign and local enterprises.
FDI has made a significant and irreplaceable impact on Vietnam by bringing in resources, capital and technology, particularly to processing, manufacturing and supporting industries, which are things Vietnam seriously needs. They create jobs for locals and play a significant role in exports, with more than 60 percent of Vietnam’s export revenue coming from the FDI sector at present. They also help improve corporate management and increase competition between FIEs and local companies.
To clarify, I think the issue is to create a level playing field for all companies, so that they can compete fairly, not to compare incentives.
* The Vietnamese government issued Resolution 103 in August 2013 aiming to enhance the efficiency of FDI in Vietnam. As the Minister of Planning and Investment, what is your appraisal of this and what still needs to be done?
Resolution 103 covers many fields and tasks. Having only operated for four months, it is still too early to make an appraisal, but I may say it’s now time for Vietnam to further improve its legal procedures and investment climate. This is a very important task because it will continue to simplify procedures and make life easier for FIEs. Another task is to review decentralisation in FDI management.
Avoiding overlapping and repetition in investment promotion efforts among the central government and local authorities is another job. We must also make clear directions for FDI attraction as the period for luring FDI is by all means over and now is the time for sound selection. Therefore, over the past four months, the Ministry of Planning and Investment and the government have reviewed our 25 years of FDI attraction and worked out the next tasks.
* What are the next priorities?
I think we continue improving the legal system, for instance, about the decentralisation process.
* You have repeatedly mentioned institutional reform as being key to further success. What does it mean in terms of FDI attraction?
It means the investment environment. One of the goals is to create a level playing field for state-run and private companies, for FIEs and local firms. Another is equality for all enterprises in getting access to resources. Institutional reform includes many other issues because all have things to do with the investment environment. Institutional reform aims to bring about good governance and transparency, and this is in line with international standards. For example, there are so many procedures which are difficult to understand, so people have to find a way to complete the task, leaving the door open for corruption. Reform isn’t easy, the whole country needs a strong political will to carry it out. If we fail to create such a strong will to reform, old institutions will continue to be hurdles and we will face obstacles in both FDI attraction and promoting the development of local businesses. Therefore, we would miss growth targets and fail to make sustainable growth in the future. Resolution 103 is a message from the Government for such reforms.
* The MPI, its Foreign Investment Agency, VIR and some other organisations are hosting a workshop on enhancing the efficiency of FDI in Ho Chi Minh City on January 10. What is your message for the event?
The workshop needs to work out proposals for the MPI and the government and suggested solutions for the resolution. That’s what I need from the workshop. Another message from me is that Vietnam is already aware that it has to continue its reform efforts of embracing transparency and facilitating FDI activities in the country, and that the government protects the legitimate interest of investors./.
* Over the past 25 years, foreign direct investment has made substantial contributions to Vietnam’s socio-economic development, and FDI inflows have reached huge amounts. However, FDI is also said to have caused obstacles to local businesses and Vietnam should shift its focus to promoting local firms. What do you think about this?
I don’t agree with that point of view and it needs to be seriously reconsidered. Vietnam has to make more efforts to attract more FDI. The important thing is to properly select foreign-invested enterprises (FIEs), not to distinguish FIEs from local enterprises, because FDI is a vital component of the economy. All countries compete to attract FDI, even the Europeans and the US. Southeast Asian countries like Indonesia, Malaysia and Thailand all do this.
Regarding obstacles, I think it’s how to administrate FDI that counts. For example, it’s a must to prevent transfer pricing and tax evasion. Actually, distinguishing FIEs from local businesses is just for administration because they all operate under Vietnamese laws, all pay taxes and all perform corporate duties including CSR. Therefore, I think we should not distinguish foreign and local enterprises.
FDI has made a significant and irreplaceable impact on Vietnam by bringing in resources, capital and technology, particularly to processing, manufacturing and supporting industries, which are things Vietnam seriously needs. They create jobs for locals and play a significant role in exports, with more than 60 percent of Vietnam’s export revenue coming from the FDI sector at present. They also help improve corporate management and increase competition between FIEs and local companies.
To clarify, I think the issue is to create a level playing field for all companies, so that they can compete fairly, not to compare incentives.
* The Vietnamese government issued Resolution 103 in August 2013 aiming to enhance the efficiency of FDI in Vietnam. As the Minister of Planning and Investment, what is your appraisal of this and what still needs to be done?
Resolution 103 covers many fields and tasks. Having only operated for four months, it is still too early to make an appraisal, but I may say it’s now time for Vietnam to further improve its legal procedures and investment climate. This is a very important task because it will continue to simplify procedures and make life easier for FIEs. Another task is to review decentralisation in FDI management.
Avoiding overlapping and repetition in investment promotion efforts among the central government and local authorities is another job. We must also make clear directions for FDI attraction as the period for luring FDI is by all means over and now is the time for sound selection. Therefore, over the past four months, the Ministry of Planning and Investment and the government have reviewed our 25 years of FDI attraction and worked out the next tasks.
* What are the next priorities?
I think we continue improving the legal system, for instance, about the decentralisation process.
* You have repeatedly mentioned institutional reform as being key to further success. What does it mean in terms of FDI attraction?
It means the investment environment. One of the goals is to create a level playing field for state-run and private companies, for FIEs and local firms. Another is equality for all enterprises in getting access to resources. Institutional reform includes many other issues because all have things to do with the investment environment. Institutional reform aims to bring about good governance and transparency, and this is in line with international standards. For example, there are so many procedures which are difficult to understand, so people have to find a way to complete the task, leaving the door open for corruption. Reform isn’t easy, the whole country needs a strong political will to carry it out. If we fail to create such a strong will to reform, old institutions will continue to be hurdles and we will face obstacles in both FDI attraction and promoting the development of local businesses. Therefore, we would miss growth targets and fail to make sustainable growth in the future. Resolution 103 is a message from the Government for such reforms.
* The MPI, its Foreign Investment Agency, VIR and some other organisations are hosting a workshop on enhancing the efficiency of FDI in Ho Chi Minh City on January 10. What is your message for the event?
The workshop needs to work out proposals for the MPI and the government and suggested solutions for the resolution. That’s what I need from the workshop. Another message from me is that Vietnam is already aware that it has to continue its reform efforts of embracing transparency and facilitating FDI activities in the country, and that the government protects the legitimate interest of investors./.
