If Vietnam wants to improve the efficiency of foreign direct investment projects, it must change its policies, procedures and targets to attract capital, a conference heard Nov. 3.
In the Nov. 3 conference titled "Foreign Investment and Private Economic Development: Experiences of the Republic of Korea (RoK) and Taiwan", experts said the attraction of foreign direct investment (FDI) always had two sides, as the FDI policies of other countries were aimed at making the most of their investment and minimising the disadvantages, but Vietnam had not succeeded in doing the same.
To improve the quality of FDI capital, Vietnam should measure the efficiency of FDI attraction by focusing on the amount of disbursed capital rather than the registered capital, they said.
According to the Foreign Investment Agency under the Ministry of Planning and Investment, the country's registered FDI capital in 2008 reached a record high of nearly 70 billion USD but the amount actually used was just 11 billion USD.
Phan Duc Hieu, deputy head of the Business Environment and Competitiveness Board of the Central Institute for Economics Management (CIEM), said there was always a difference between "registered capital" and "distributed capital".
In Taiwan and the Republic of Korea , investors were only permitted to complete investment procedures when they transferred investment capital into the country or territory, meaning the quantity of FDI announced was equal to the amount received, Hieu said.
CIEM deputy head Nguyen Dinh Cung said the regulation helped control the financial capacity of foreign investors.
In Vietnam , foreign enterprises were simply required to complete procedures in line with the country's laws in order to be considered foreign investors. This gave rise to the distinction between "committed capital" and "disbursed capital".
The financial capacity of foreign investors is currently proved in a report submitted during the investment registration process. However, the quality of the reports has been a controversial issue.
Poor management capacity along with running a race to attract FDI resulted in localities licensing FDI projects on a grand scale without taking into account their long-term social efficiency, Cung said.
He said that the management of FDI capital in the RoK and Taiwan was centralised.
In The Republic of Korea , FDI capital was managed by Invest Korea Bank and the Korean Business Centre, while in Taiwan the management authority was the Investment Committee under the Ministry of Economics. In Vietnam , this task fell to local agencies.
Cung said the RoK 's FDI target was set to develop high-technology and increase economic competitiveness, so the country gave investment priority to specific industries rather than localities.
However, other conference attendees said that Vietnam 's targets were different from those of the RoK and Taiwan as here they were aimed at comprehensive development without regional discrimination.
In general, the economic transformation process of East Asian countries was quite similar, except for its speed, Cung said. "We have to change our thoughts. This is a key and decisive factor. We should not wait for others to bring perfect change to us," he stressed.
According to the agency, the structure of FDI allocation in Vietnam is not suitable with most hospitality and catering services, and real estate projects.
In 2009, hospitality and catering services was the most attractive field among foreign investors, luring 8.8 billion USD in capital. The real estate sector ranked second with 7.6 billion USD.
Meanwhile, FDI in the processing industry has decreased continuously from 70.4 percent in total FDI in 2005 to 13.6 percent in 2009./.
In the Nov. 3 conference titled "Foreign Investment and Private Economic Development: Experiences of the Republic of Korea (RoK) and Taiwan", experts said the attraction of foreign direct investment (FDI) always had two sides, as the FDI policies of other countries were aimed at making the most of their investment and minimising the disadvantages, but Vietnam had not succeeded in doing the same.
To improve the quality of FDI capital, Vietnam should measure the efficiency of FDI attraction by focusing on the amount of disbursed capital rather than the registered capital, they said.
According to the Foreign Investment Agency under the Ministry of Planning and Investment, the country's registered FDI capital in 2008 reached a record high of nearly 70 billion USD but the amount actually used was just 11 billion USD.
Phan Duc Hieu, deputy head of the Business Environment and Competitiveness Board of the Central Institute for Economics Management (CIEM), said there was always a difference between "registered capital" and "distributed capital".
In Taiwan and the Republic of Korea , investors were only permitted to complete investment procedures when they transferred investment capital into the country or territory, meaning the quantity of FDI announced was equal to the amount received, Hieu said.
CIEM deputy head Nguyen Dinh Cung said the regulation helped control the financial capacity of foreign investors.
In Vietnam , foreign enterprises were simply required to complete procedures in line with the country's laws in order to be considered foreign investors. This gave rise to the distinction between "committed capital" and "disbursed capital".
The financial capacity of foreign investors is currently proved in a report submitted during the investment registration process. However, the quality of the reports has been a controversial issue.
Poor management capacity along with running a race to attract FDI resulted in localities licensing FDI projects on a grand scale without taking into account their long-term social efficiency, Cung said.
He said that the management of FDI capital in the RoK and Taiwan was centralised.
In The Republic of Korea , FDI capital was managed by Invest Korea Bank and the Korean Business Centre, while in Taiwan the management authority was the Investment Committee under the Ministry of Economics. In Vietnam , this task fell to local agencies.
Cung said the RoK 's FDI target was set to develop high-technology and increase economic competitiveness, so the country gave investment priority to specific industries rather than localities.
However, other conference attendees said that Vietnam 's targets were different from those of the RoK and Taiwan as here they were aimed at comprehensive development without regional discrimination.
In general, the economic transformation process of East Asian countries was quite similar, except for its speed, Cung said. "We have to change our thoughts. This is a key and decisive factor. We should not wait for others to bring perfect change to us," he stressed.
According to the agency, the structure of FDI allocation in Vietnam is not suitable with most hospitality and catering services, and real estate projects.
In 2009, hospitality and catering services was the most attractive field among foreign investors, luring 8.8 billion USD in capital. The real estate sector ranked second with 7.6 billion USD.
Meanwhile, FDI in the processing industry has decreased continuously from 70.4 percent in total FDI in 2005 to 13.6 percent in 2009./.
