Vietnam Targets US$4.5Bln in FDI Attraction

Vietnam Targets US$4.5Bln in FDI Attraction

In 2004, Vietnam attracted US$4 billion in foreign direct investment (FDI). This is the highest figure since 1998. Many economic experts predict that FDI will see a high increase in 2005. VIB Forum interviewed Dr Le Dang Doanh, senior economic expert and assistant to the minister of planning and investment.

What do you think about the 2004 FDI attraction?

Vietnam’s FDI attraction in 2004 is an encouraging sign of a recovery since 1998 with half a figure coming from new projects and the remainder coming from capital increase of operating projects. The results from the fact that Vietnam has made great efforts to improve its investment environment, and especially it shows the international community that Vietnam is a country of political stability with a high socio-economic growth rate. In addition, the Vietnamese Government’s reform commitments have encouraged investors, who believe in what the local Government has promised to do.

However, we have yet to be satisfied with this figure as there are still many factors hampering Vietnam’s FDI attraction. These mainly include a lack of transparency and rapid changes in policies. Concretely, Japan, despite having raised Vietnam from 14^th position to fourth in terms of its attractiveness for investment, has not invested more in Vietnam. The Vietnam-US Bilateral Trade Agreement is considered favourable and open for investment attraction but we have yet to receive much investment from the US.

What do you think about a target of attracting US$4.5 billion in FDI in 2005? Which fields will Vietnam be able to expand its FDI attraction?

As far as I am concerned, this figure is quite modest. We can achieve this target if we can select the fields of great potential that are in need of investment. Many foreign-invested enterprises, such as the Nghi Son Cement Company and Chinfon, have applied for permission from the Ministry of Planning and Investment to increase their capital in 2005. Early this year, the Ministry of Planning and Investment will grant licences for some major projects in housing and information technology.

Vietnam should expand investment attraction in housing, office leasing, and services. It will be difficult to attract FDI in 2005 if we continue to limit investment in textile and garment making, cement, steel and paper production. Vietnam should open up investment opportunities in banking, insurance, securities, and intellectual property because these are the fields in which foreign countries, especially developed countries are very interested.

Which measures should Vietnam take for an effective attraction of FDI?

In my opinion, if the investment fields we offer meet investors’ needs, the two sides will gain a high effectiveness. For example, if we want to attract investment from Taiwan and the Republic of Korea, we should call for investment in footwear and garment making, but we should open the banking, securities, insurance, PC software and consultancy services markets to attract investment from Japan, the US and European countries. Therefore, we should develop FDI attraction strategies fro each country. To increase the effectiveness of FDI attraction, Vietnam should address three issues. Firstly, Vietnam’s policies should be unique and predictable. Investors want to know how effective their investment capital is. Secondly, Vietnam should get rid of corruption and bureaucracy. Investors have initially appreciated Vietnam’s efforts in this aspect, but Vietnam needs to do much more in 2005. Thirdly, Vietnam should develop its human resources to meet investors’ requirements.

What will the Ministry of Planning and Investment do to improve the investment environment in the coming years?

The ministry will strive to address urgent issues raised by investors. For example, the ministry will propose an amendment to the Decree 105 of the Ministry of Labour, War Invalid and Social Affairs, which allows foreign investors to employ a number of foreigners equal to three per cent of their staff members. This is unreasonable, why should foreign firms pay more for foreign employees when Vietnamese workers are qualified for their requirements? In the coming years, Vietnam will focus on attracting investment in some industrial parks of great potential, so that they will have well-developed infrastructure facilities and services, instead of overspreading resources in many industrial parks as is presently the case. The Investment Law, which is being drafted, stipulates a common ground for all investors. It also stipulates fields in which investors register but don’t have to apply for licences. The draft law will be submitted to the National Assembly for approval this May. It will help attract more FDI flows to Vietnam.

• Reported by Thi Van