The Foreign Investment Agency (FIA) under the Ministry of Planning and Investment (MPI) said Vietnam attracted US$14.7 billion foreign direct investment (FDI) capital in 2011, equal to 74 percent of 2010. Explaining this decline, FIA Deputy Director Nguyen Noi said, “The slump partly results from global and Vietnamese economic slowdown and Vietnam’s growing attention to investment quality, capital quality and disbursement process.”
Three challenges in FDI attraction
At the "Economic Forecast 2012 - 2015" Conference recently held in Hanoi, a FIA official pointed out that Vietnam was facing three major challenges. The first is infrastructure development that fails to meet economic development needs and fails to serve as a magnet for new investors and ensure the best operating result for existing FDI enterprises.
The second is human resources. Although this was previously considered a plus for Vietnam in attracting foreign investment, it turns out to be a barrier now when the ratio of untrained workers increases and labour costs grow. In a recent study by the FIA and the United Nations Industrial Development Organization (UNIDO), as many as 32 percent of foreign investors said the lack of high-tech workforce in Vietnam is the most important reason for their inability to run at full capacity. This directly cuts the advantage of low labour costs.
The third is the institutional challenge. Mr Noi said despite marked and recognised progress, investors are showing concern about the time needed to solve administrative procedures when they do business in Vietnam.
Efforts to overcome difficulties
He said Vietnam is trying to remove these barriers. The Prime Minister issued Decision 71/2010/QD-TTg on pilot public - private partnership (PPP) investment mechanism regulations – a move to mobilise maximum resources from the domestic private sector and the world for infrastructure development. Besides, Vietnam is actively carrying out a project to renovate and develop vocational training from now to 2020 in order to raise the ratio of trained labourers to 55 percent by 2020. The country is also looking into what are considered barriers to production and business activities to make changes and facilitate the formation and operation of FDI enterprises.
Notably, the number of super-large projects, particularly real estate projects, declined. In 2011, only two projects had an individual registered capital of over US$1 billion. Both are industrial. The first was the US$2.26 billion Jak Hai Duong power plant and the other was the US$1 billion First Solar cell production facility in Ho Chi Minh City.
In 2012 and subsequent years, Vietnam will not focus on FDI value, but on quality and disbursement. FDI attraction will essentially match the 5-year socioeconomic development plan from 2011 to 2015 and the 10-year socioeconomic development strategy from 2011 to 2020. Accordingly, the FDI sector will be developed in accordance with plans. Projects using modern, environmentally friendly, cost-effective and energy-saving technologies will be given priority. FDI projects will be encouraged to develop supporting industries, take part in global production networks and value chains, and promote competitive advantages, advanced technology and human resource training. FDI will be discouraged for non-manufacturing sectors, trade deficit-causing fields, fields that use natural and land resources inefficiently, employ outdated technology or cause environmental pollution. From these principles, only financially and technologically qualified investors will be selected. Vietnam will adjust FDI policies, incentives and mechanisms.
Given global economic uncertainty, limited domestic infrastructure and human resources, and the time needed for policy changes, the Foreign Investment Agency forecast that Vietnam will attract US$15 billion in FDI capital and see foreign investors to disburse US$11 billion in 2012.
Huong Giang
Vietnamese
