Economic Sector

Last updated: Friday, February 15, 2019


Decent Business Environment Is More Important than Preference

Posted: Monday, February 26, 2018

“The key is transparency, the more decent the business environment, the more the honest investors will appreciate. For decent and classy investors, a clear, transparent institution is always the core factor to sustainable development,” said Dr. Tran Dinh Thien, Director of Vietnam Institute of Economics, in an interview granted to the Vietnam Business Forum on factors of appeal to investors, especially foreigners, in Vietnam today. Le Sang reports.

How do you assess Vietnam’s FDI attraction in the past time?
Foreign investment has been one of key growth drivers of Vietnam's economy over the past three decades. It is both a momentum for and a competitive force against the domestic business sector. Vietnam has drawn a lot of foreign direct investment (FDI) capital but most of it is of low quality. Most projects have small scale, limited technological level, limited financial capacity and governance capacity. We lack gigantic projects - the eagles that can portray the economic landscape. Or we have some big FDI enterprises, but they basically contribute to quantity growth, generate a lot of jobs, mostly manual work, and cannot lead and spread their impacts on the domestic market. In contrast, they “squeeze” the private sector in the country and cause environmental pollution.

It is noted that the growth pattern that pursues the ‘GDP achievement’ is still quite popular. It has forced localities to attract investment at all costs to increase GDP and budget revenue. While the original goal of FDI attraction is changing the economic class by adoption of technology and management capacity, we are too focused on quantitative norms. This is a ‘bottom-up’ story as they race to lower their value, attract investment capital by offering incentives, and ignore necessary bonds and technical barriers while paying little heed to quality and development performance norms and paying little attention to improving the business environment and institutions to exert a pull on good investors. Therefore, in the coming time, we have to fundamentally change our mindset in FDI attraction.

For you, what are the answers to these matters?
In order to improve this reality, it is necessary to create an effective connectivity between domestic and FDI enterprises and to identify the right motives of FDI attraction. Investors must be attracted by intrinsic local resources and development prospects, rather than more and more incentives, which seem to have reached the critical limit, resulting in shortcomings and distorting the investment climate.

It is very encouraging that the Government and localities are increasingly focusing on sustainability and technology in investment attraction, actively improving the business environment, and selectively attracting investors into industries that use advanced technologies and generate high added values. The announcement of annual PCI rankings also significantly helps localities identify weaknesses to improve their investment attraction results.

In my opinion, the following major points may be noted:
Firstly, the key is to have a really good business environment, because a decent business environment will attract good investors who not only need incentives but also value such factors as public and transparent institutions and supportive readiness of authorities for investors.

Secondly, it is necessary to have a long-term vision for development planning, especially the vision for modernisation in the concept of “shifting the structure towards industrialisation and modernisation”. Localities have to prove that their development schemes are promising, and development plans are visionary and long-term, as good investors will look at them when they consider investment decisions.

In fact, development plans seem to very generic and quite similar from province to province. Development plans must tell investors that we have a vision, we have innovative solutions and groundbreaking capacity, and we have, and will, prepare conditions to convince big investors. We can completely give conditions to investors.

Thirdly, human resource is also a big issue. Localities need to have wise human resource development strategies in order to train qualified human resources. They should actively play an intermediary role in promoting commitments between investors and labourers on how the latter will be employed after being trained.

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