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Last updated: Thursday, December 13, 2018


FDI - Economic Growth Driver of Vinh Phuc Province 

Posted: Friday, January 05, 2018

Vinh Phuc province was re-established on January 1, 1997. At that time when the province embarked on building an independent administrative system with a lot of hardships like a small natural area - mainly midland and mountains, a big population, poor mineral resources, agriculture-based economy, undeveloped industry and service, a few enterprises using backward technologies and having low economic performance, weak infrastructure (six communes had no access to electricity; a third of provincial roads met standards, only 10 km of district roads were asphalted, etc.)

However, with its dynamic and creative attitude to investment attraction, Vinh Phuc province has basically become a modern industrial province with many socioeconomic indicators ranked high in the country. And, Vinh Phuc has become a prime example of success in attracting many world-leading corporations to locate their projects in the province like Toyota, Honda (Japan), Piaggio (Italy) and many other big investors from South Korea, Taiwan (China) and others. As of November 2017, Vinh Phuc province had 263 FDI projects with a total registered capital of US$3.74 billion, of which 60 per cent was disbursed. The FDI sector has created a great momentum in local economic development.

Leverage for economic development
Foreign direct investment (FDI) has made a particularly important contribution to social investment fund in Vinh Phuc province. To date, foreign investors spent some US$2.3 billion on their projects, equal to 64 per cent of the total registered FDI capital. FDI always accounted for some 20 per cent of the total social investment fund. FDI companies’ share of industrial production value rapidly climbed from 19 per cent in 1997 to 63 per cent in 2005. Their share of industrial production value was stable at 63 per cent in the next period.

The FDI sector’s contributions to the gross regional domestic product (GRDP) have increased gradually over the years. The sector contributed VND159.95 billion to GRDP in 1997, accounting for 8 per cent, VND1,040.85 billion in 2000, or 27 per cent of the share, and VND27,000 billion in 2017, or 34 per cent.

Export value is mostly made up by the FDI sector. In 2017, it earned over US$ 2 billion from exports, or over 95 per cent of the province’s total exports. Its imports also accounted for a very high proportion. In 2017, its import turnover reached over US$2.66 billion, or 94 per cent of the province’s imports.

Foreign investment in the province is the most important element to sustain economic growth and budget revenue since its re-establishment. In 1997, the province’s budget revenue was about VND100 billion and relied on central funding. Since 2004, Vinh Phuc has been able to balance its budget revenue and spending and started to contribute its surplus to the central budget. The province’s budget revenue exceeded VND10 trillion in 2009, VND25 trillion in 2015, and VND30 trillion in 2016 - the highest-ever (300 times that of 1997). The value was estimated to reach VND28.55 trillion in 2017. Vinh Phuc is one of 13 localities to send its budget revenue to the Central State Budget. Structurally, domestic revenue accounted for over 80 per cent of total revenue.

FDI promotes local economic restructuring towards industrialisation and modernisation. In 1997, the agricultural value accounted for 45.13 per cent, the industrial and construction value made up 18.4 per cent, and the services value contributed 36.48 per cent. In 2017, the respective shares were 8.52 per cent, 89.62 per cent, and 31.86 per cent.

FDI contributes positively to employment and personnel quality improvement. The FDI sector employs tens of thousands of labourers and provides thousands of indirect jobs for locals. The workforce in the FDI sector is expanding. Foreign-invested firms employed about 1,300 workers in 1997; 33,080 in 2010 and over 75,000 in 2017, of which Vinh Phuc residents accounted for 73 per cent. Many local labourers have become prominent executives and expert workers who are ready to take on new know-how and advanced governance practices.

In addition, FDI has helped raise technological level and management experience of organisations and enterprises in the province and contributed to expanding external relations of the province.

Stepping up reforms, making investment breakthroughs
To become a modern industrial province and a centrally governed city, in the coming years, Vinh Phuc will focus on FDI to strengthen the engine of local economic development.

In the coming time, Vinh Phuc will give priority to attracting high-tech, environmentally-friendly projects with estimated great contributions to socioeconomic development; projects capable of joining global value chains; projects engaged in electronics, telecommunications, mechanical engineering (automobile and motorcycle manufacture and assembly, etc.), construction materials, new materials, supporting industries for automobile, motorbike and electronic industries; projects building and developing industrial park infrastructure; tourism service projects; and international universities. It will also call investment capital in services such as finance, banking, insurance, health care, education and training.

The province will draw investment projects into industrial parks, raise the occupancy rate in industrial parks, integrate industrial development with environmental protection, thoroughly handle environmental pollution at industrial parks, gradually form regional industrial centres, and encourage supporting industries for automobile and motorbike industries. It will target at multinational corporations, industrial subcontractors, and small and medium businesses from Japan, South Korea and Taiwan (China). At the same time, the province will approach potential partners from Europe (Germany, Italy) and the United States.

To achieve these targets, the province has worked out and executed many solutions such as establishing long-term FDI attraction and utilisation strategy. Particularly, the FDI attraction and utilisation orientation must match the master plan for socioeconomic development to 2020, with a vision to 2030. FDI prospect must be made clear in the context of economic post-crisis.

Investment attraction must be closely linked to human resource development in order to ensure adequate manpower supply and personnel quality for enterprises which always have higher requirements for human resources. The province effectively plans human resources training and development, particularly high-level human resources to attract high-tech projects. It will improve the quality of planning, especially land-use planning, construction planning, urban planning, sector planning and product planning while making new planning and adjusting existing planning if inappropriate. Plans will be made public to investors and citizens. Vinh Phuc will engage enterprises, investors and residents in planning work; strengthening State management of industrial parks; encourage all economic sectors, well-reputed investors, financially and technologically viable investors to invest in construction and operation of industrial parks, build traffic routes to industrial parks. It will complete restoring and upgrading provincial roads, water supply and drainage systems, power grid, social infrastructure, and services.

The province will continue to accelerate administrative reform by expanding the one-stop single-window mechanism at the Pubic Administrative Centre to reduce time and expense for enterprises, create an open, transparent enabling investment environment, raise the provincial competitiveness index (PCI); strengthen central and local investment management; review and restructure training facilities to make sure that training contents and scales match demands of employers. It will also change investment promotion contents to attract target investors.

Vinh Phuc will diversify investment promotion channels via well-reputed domestic and foreign agencies, forums and economic organisations, representative offices of Vietnam in foreign countries and foreign investment promotion agencies in Vietnam; strengthen coordination of concerned branches and agencies in business management and supervision; and focus measures and solutions to tackle hardships emerging from the process of project deployment.

Vinh Phuc province has declared three messages of commitment to investors: “Good regulatory framework, good technical infrastructure and good business service” in order to materialise and realise the motto “Investors in Vinh Phuc are citizens of Vinh Phuc, the success of the business is the success of the province.” Vinh Phuc always welcomes and opens its door open to welcome domestic and foreign investors to invest in the province to jointly build a more prosperous and civilised province.

Nguyen Van Tri
Chairman of Vinh Phuc Provincial People’s Committee

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