Sorting out Effective FDI Projects

Prof and DSc Nguyen Mai, President of the Vietnam Association of Foreign Enterprises (VAFE), said after more than two decades of pursuing a market-oriented economy, sustainable development has become a matter of great significance in the process of national industrialisation and a point of reference for investment activities, including foreign investment. However, its downsides should also be taken into account.

 

According to a report released by the Environment Department under the Ministry of Natural Resources and Environment (MONRE), Vietnam is drastically affected by global warming. The temperature in Vietnam has risen 0.7 Celsius degrees and the sea level climbed 20 centimetres in the past 50 years. In the future, temperatures are expected to increase 3 Celsius degree and the sea level rise 1 meter, affecting some 40,000 km2, or 12.3 percent of the area, and 10 percent of Vietnam's population and causing 10 percent loss of GDP.

 

Dr Mai said FDI has created millions of jobs with rising pay and brought in new technologies, high-quality services, and advanced governance methods. However, environmental pollution is worsened by the operation of enterprises, including FDI enterprises. Recently, the Vietnam - Switzerland Clean Air Programme cooperated with the Environment Monitoring and Analysing Centre and the Department of Natural Resources and Environment of Hanoi City to carry out two rounds of assessing SO2, NO2 and Benzene in more than 100 locations in eight urban districts in Hanoi City. The results raised concern about environmental pollution. The most serious worry is above-limit PM10 dust.

 

Meanwhile, disputes over pay occurred in some FDI enterprises with employees protesting about pay that was not proportional to the workload and rising consumer prices, unsafe working conditions, unlawful overtime work, and disrespect of employees. The country has also licensed hundreds of golf courses. Long An province, for example, allowed investors to build golf courses on rice-growing land while food security is a matter of serious concern. Some provinces have already granted permission to foreign investors to plant forests on more than 300,000 hectares of land reported to have impacts on national defence and security. Steel projects with annual capacity of tens of millions of tonnes have been simultaneously carried out in three or four provinces. Supply will far exceed the domestic demand, while it is not easy to seek out export markets. Besides, a lot of foreign-led companies announced business losses, forcing Vietnamese partners in their joint ventures to transfer their stakes to become wholly foreign-invested business entities.

 

Negative occurrences relating to FDI reflect the true nature of the market economy, said Mr Mai.

 

Prof Do Duc Thanh of National Economics University said we need to have an appropriate approach to FDI when entering a new phase. Importantly, the State must have an FDI attraction strategy built on sustainable development standards, placing importance on the amount of FDI increments and the quality of FDI capital, and ensuring suitability with the national development orientation for the 2011-2020 stage.

 

Dr Nguyen Mai said the quality and performance of FDI projects needs to be viewed in a proper angle that matches the objectives of national social and economic development, industry development, regional development, and local development. The quality and efficiency of FDI projects must always be taken into account when appraising it. For instance, whether such a project brings in such benefits as State Budget income, technology transfer, formation of highly skilled workforce, etc. or whether it causes adverse impacts like environmental pollution and harmful effects to local people.

 

In principle, FDI is not a mandatory requirement for a nation. Therefore, governments take the initiative in selecting investment projects and partners; refusing to license FDI projects that do not guarantee labour standards, pollute the environment, or overexploit natural resources for export, rather than for higher product value; or rejecting forestation projects that may affect national security in border areas.

 

Also, State management agencies need to focus more on building policy, institution, rules, and standards on labour, wage and environment for FDI projects to follow, because State management efficiency is measured by actual results, rather than endless documents submitted by companies to competent authorities, said Mr Mai.