How to effectively attract FDI, allocate ODA and create build trust among foreign investors are the issues that the Vietnam Business Forum set out in the interview with Mr Hoang Viet Khang, Director of the Foreign Economic Relations Department, Ministry of Planning and Investment. Anh Phuong reports.
2012 saw vital contributions of FDI and ODA in the strategy of socio-economic development. Entering 2013, these two capital flows are still seen as a lever for sustainable Vietnamese economic development, Mr Hoang Viet Khang said.
How do you evaluate the attraction of ODA and FDI in the past?
Vietnam is still in the stage of restructuring its economy, so the mobilisation of both domestic and international capital is essential. The effective allocation and use of capital in response to the confidence of investors was a top priority for the Government of Vietnam.
In 2012, the economic situation in the country and the world fluctuated, impacting capital inflows. In particular, many investors continue to pledge to increase funding for Vietnam, but there are also donors decreasing aid for Vietnam. Besides, Vietnam has been put in middle-income countries category so some aid will be cut, including ODA and other preferential loans. In addition, by 2015 most aid is scheduled to be cut, a warning to the Government of Vietnam. So from this point, Vietnam needs to optimize aid to implement the Millennium Development Goals by that time.
ODA and other preferential loans of donors in the period 2011-2015 are expected to commit capital of about US$32-34 billion, disbursing about US$14-16 billion (equivalent to about 6 percent of total social investment), of which approximately 50 percent of disbursements was forwarded from programmes and projects signed during 2006-2010. Thus, in 2011-2015, the annual average ODA and preferential loans disbursed will be around US$2.8 to 3.2 billion. The implementation of commitments and disbursements of ODA and preferential loans above have important implications for supporting the implementation of the five-year socio-economic development plan for 2011-2015.
Regarding FDI, the attracting rate was less than in 2011. Specifically, in 2012, FDI in Vietnam accounted for 77.6 percent of that in 2011, about US$12.72 billion, of which the new registered capital was nearly US$7.8 billion with 1097 projects, increasing by more than US$4.9 billion with 406 projects. This figure also shows that we only reached 80 percent of the target from the beginning of the year, which was attracting US$15 - 17 billion of FDI. The biggest capital source was Japanese investors, which accounted for 40.3 percent of total FDI; Singapore, 12.3 percent and South Korea, 9.1 percent. Particularly, 2012 also recorded strong breakthroughs in the processing manufacturing industry when the industry attracted 70 percent of FDI poured into Vietnam, reaching nearly US$8.2 billion.
In your opinion, what stringent measures does Vietnam need to attract and effectively use foreign capital?
In fact, to ensure the implementation of the objectives in the five-year socio-economic development plan for 2011 -1015, domestic capital should account for 75 – 80 percent and foreign capital, about 20 – 25 percent. It is a very large financial resource which requires measures to develop plans to fully. To do this, the government and departments should further improve the legal framework to ensure consistency in the policies and the legal system. Also, the use of ODA capital and other preferential loans should take into account economic efficiency and a safe ratio of public debt. Besides, the government also needs to take into account the ability to expand access to financial resources. Not only businesses, corporations, and government agencies, but also the object of private enterprises can participate in ODA projects and use the capital if they have strategic economic development plans. Also, it is important to improve the supervision of the efficient use of funds and accountability of agencies. It’s urgent to clarify division of roles between the donors to optimize grants.
Regarding FDI, due to the impact of international factors, we also need to classify types of FDI projects, oriented to the high-tech sector, less costly financial resources, and environmental friendly. We should restrict capital going to the non-manufacturing sectors which increase the trade deficit, have inefficient use of natural resources, land and power, and cause environmental pollution, such as a number of projects producing steel building materials. Another major problem of this capital flow is that the difference between performance and capital disbursement must be calculated closely, so that this ratio is at equilibrium and asymptotic. We should prevent the trend that in the beginning of the period registered capital is very high but in the end of the period, actual implemented capital was low, meaning that early registered capital is "virtual capital", wasting national resources. Besides, relevant ministries also need to sync solutions to attract FDI into Vietnam such as: law and policy; planning; improving infrastructure; human resources; clearance; decentralization and investment promotion. We should absolutely avoid the situation of having projects approved but later grind to a halt due to difficulties in capital mobilization, disbursement, infrastructure, or the withdrawal of investors, damaging the economy.
In your opinion, apart from the industry attracting huge capital in the past, in 2013 which sector will attract capital efficiently?
Currently, Vietnam is listed among countries with market economies by the international community, so in addition to the investment priorities of attracting domestic and foreign capital for the economic development of "hot" sectors such as manufacturing, mobile phones and electronic components, the backbone infrastructure of international airports, deep-water ports, highways and power system should be given the highest priority in using ODA capital flows and concessional loans.
Thank you very much!
Vietnamese
