Vietnam to improve institutions to attract foreign investment

In view of the important contributions of investment capital to the local economy, Vietnam needs immediate solutions to attract more FDI and strengthen its sources, according to experts.
Vietnam to improve institutions to attract foreign investment ảnh 1Samsung Electronics Vietnam Thai Nguyen in the northern province of Thai Nguyen (Photo: Photo courtesy of Samsung Vietnam)
Hanoi (VNS/VNA) - In view of the important contributions of investmentcapital to the local economy, Vietnam needs immediate solutions to attract moreFDI and strengthen its sources, according to experts.

According to data, after 35 years of implementing the open-door policy toattract FDI, up to now, Vietnam has received investment from 140 countries andterritories around the world.

Foreign capital flows have been present in most localities in the country withprojects invested by big global names such as Intel, Microsoft, Foxconn,Samsung, Sanyo, Sony, Fujitsu, Toshiba, and Panasonic.

Depicting a full picture of the situation in Vietnam, the annual report onforeign investment in Vietnam in 2021 by the Association of Foreign InvestmentEnterprises (VAFIE) published recently highlights encouraging results.

The report said: "FDI enterprises account for about 25 percent of totalsocial investment capital, 55 percent of total industrial production value, andmore than 70 percent of export turnover."

It said this proved the local business and investment environment wasincreasingly improving, making foreign investors believe in the success ofdoing business in Vietnam by adjusting investment capital to expand thebusiness and increase profits.

Notably, foreign investors' capital contribution and share purchase activitiesin Vietnam have been very active in the past 10 years, accounting for a highproportion of registered and realised FDI.

In 2021, the value of business mergers and acquisitions will reach 12 billionUSD, up 150 percent compared to 2020, equivalent to the record set in 2017 of 13.4billion USD, despite the context investment environment and the world changeddramatically due to the impact of the pandemic.

In addition, non-equity investment (NEM) was becoming a new investment methodin Vietnam, such as with the two investment deals of Vingroup in Vinfast andVinsmart brands.

Nguyen Mai, President of VAFIE, said this form of investment allowedmultinational corporations to coordinate product supply chain activities,creating opportunities for domestic manufacturers and suppliers to join theglobal supply chain.

Mai said the resources of foreign investors often included the provision of trademarks,intellectual property rights, and business know-how, which could be aninvestment trend to increase profit margins through finding potential marketswithout capital contribution.

At the same time, International Investment Research Company Limited (ISC)published the FDI Annual Report 2021, which analysed the inadequacies andlimitations in FDI attraction and made many recommendations to send toinvestors and policymakers.

Phan Huu Thang, chairman of the Report Compiling Council and former Director ofthe Foreign Investment Agency from the Ministry of Planning and Investment,told local media: "The current problems in attracting FDI are notnew."

Thang also mentioned the role of FDI in GDP growth was increasingly important,adding the proportion of total export turnover, budget contributions, jobcreation, spillover of productivity and technology and supporting industrydevelopment from them was high.

However, he also mentioned the limitations of foreign capital inflows, whichwere reflected in the low quality and efficiency of FDI attraction and use,saying: "The number of projects with advanced and modern technology andEuropean technology was only about 5 percent; there is an imbalance in theattraction and use of FDI in the area; linkages and interactions between theFDI sector and other sectors of the economy are not tight, the spillovereffects on productivity and technology are not high."

"The disadvantages in attracting and using FDI have been slowly overcome,affecting economic development, social order and nationaldefence-security."

Thang said these limitations had many causes, but the most basic was thatinstitutions and policies on FDI had not kept pace with developmentrequirements.

He added: "In the coming time, it is necessary to continue to improveinstitutions and laws on FDI attraction to improve the quality and efficiencyof attracting and using foreign investment capital."

He said at the same time that it was necessary for the active, robust,synchronous and substantive participation of ministries, branches andlocalities to create a fair, open and transparent business and investmentenvironment.

He and his colleagues emphasised the solution to monitoring and evaluating FDIprojects, especially the status of "hidden" investment in the form ofindividual investors in Vietnam. In some cases, they could set up a real estatebusiness with a capital contribution of less than 49 percent, lending money toVietnamese individuals to set up businesses.

He said speeding up the progress of building and perfecting the nationalinformation system on foreign investment to have an efficient database ofinformation to seriously and accurately evaluate the efficiency of FDI in Vietnamwas a solution.

Given that the institutions and laws related to foreign investment wereincomplete, overlapping, and not strictly enforced, some foreign investors tookadvantage of legal loopholes to exploit hidden investments in the industriesand fields where FDI was limited.

VAFIE said: "It is necessary to continue to improve institutions and lawsrelated to FDI, including the policy of applying a global minimum tax in Vietnam."

In addition, there should be solutions to improve the efficiency of attractingand using FDI by enhancing the investment and business environment, reviewingthe investment policy system, supporting investors to remove difficulties,strengthening the state management of FDI from the stage of project promotion,appraisal and implementation to the stage of inspection and supervision ofimplementation.

VAFIE recommended that the Government soon issue a decision on the set ofcriteria to evaluate the effectiveness of the FDI sector. The evaluationcriteria under construction include 26 specific economic, social,environmental, technological indicators, all serving as a basis for foreigninvestors to self-score and for project screening by localities to receiveinvestment./.
VNA

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