FDI Attraction: Breakthrough Actions and Solutions

9:09:32 AM | 22/9/2020

After a slowdown in early 2020, FDI inflows to Vietnam have increased sharply in recent months. According to experts, this is a sign of a new investment wave in Vietnam - an attractive destination for foreign investors.

Mr. Do Nhat Hoang, Director of the Foreign Investment Agency - FIA (Ministry of Planning and Investment - MPI), said, the COVID-19 pandemic has had a strong impact on global investment capital flows. Foreign investment flows in the world declined deeply and outflows were even seen somewhere. In Vietnam, according to a report by the Ministry of Planning and Investment, as of August 20, 2020, the total registered FDI fund reached US$19.54 billion, equal to 86.3% of the amount it got in the same period in 2019. Compared to countries in the region, the appeal of Vietnam's investment environment comes from internal economic factors and external effects. In particular, the successful control of the COVID-19 pandemic along with its efforts to improve the investment environment and administrative procedures has enhanced Vietnam's reputation as an attractive and safe investment destination.

However, attracting FDI in the new normal requires breakthrough actions and methods, Mr. Hoang said. What needs to be prepared includes a clean land fund, electricity supply, high-quality human resources, supporting industries and administrative procedures. Special offers are applied to large-scale projects that use advanced technology, make more added values, and facilitate Vietnamese firms to join value chains or achieve high localization. Enterprises need to take advantage of opportunities from integration; strengthen connectivity and must raise qualifications and cooperation with domestic business links.

Concurring with this point of view, Dr. Nguyen Dinh Cung, former Chairman of the Central Institute for Economic Management (CIEM), said FDI attraction in the coming period must be driven by policy packages tailored for each type of investors rather than a universal policy for all investors. In this regard, the Ministry of Planning and Investment is also working with ministries, agencies and localities to develop a support package for each type of project instead of a general incentive as before, Mr. Hoang said.

In addition, according to experts, investment attraction policies must ensure that domestic private businesses are supported to cooperate with and supply for FDI firms. Otherwise, investment attraction incentives will be available only to foreign businesses.

Regarding the future approach, Vietnam will focus on attracting investment for projects using high technology, manufacturing equipment, materials and input components for international assembly and transportation. Drawing foreign investment will be selective, with priority given to quality, effect, technology and environmental protection. Priority is given to projects using advanced technology, new technology, high technology, clean technology, modern governance and generating high added value and ripple effects.

In order to prepare a clean land fund for large investors, the Ministry of Planning and Investment asked localities to review the land fund in industrial zones and economic zones. In case projects are behind schedule, land must be reclaimed from their investors.

Recently, at the working meeting with Japanese economic organizations and businesses intending to expand investment in Vietnam, Prime Minister Nguyen Xuan Phuc also affirmed that the Vietnamese market is large enough for ambitious business investment plans consistent with restructuring and shifting strategies of global and regional supply chains of international investors. Vietnam will further develop and upgrade more convenient infrastructure such as airports, ports, logistics services and highways, as well as preventing power outages and water loss for investors. In particular, it will prepare premises and industrial zones for them to locate their factories immediately.

Needless to say, the opportunity is great, but, to catch up with the investment wave as expected, it is necessary to have coordination and participation of central and local authorities. By doing this, Vietnam can take advantage of golden opportunities and participate in global value chains.

By Ha Thu, Vietnam Business Forum