FDI Attraction: Needing to Prepare Full Internal Forces

The foreign direct investment results in 2005 and 2006 signalled a new investment wave into Vietnam. The target of attracting US$6.5 billion FDI capital in 2006 was fulfilled within 10 months. Active activities of Vietnam such as the Vietnamese leaders’ visits to the United States, the European Union, China and Japan, Vietnam’s host of ASEM and APEC summits as well as its efforts for the WTO entry are generating good results. Another important factor for the remarkable FDI attraction success is the betterment of the investment environment and the reform of administrative procedures. The dynamic Vietnamese economy usually maintains the annual growth rate of 7-8 per cent for more than a decade.

 

In infrastructure, Vietnam has made great leaps forward. From Ho Chi Minh City to Ca Mau Province, the road network has been expanded and bridges and ferries have been built (operational My Thuan and underway Can Tho bridges). Thus, the travelling time from the Mekong Delta region to Ho Chi Minh City and the South-eastern Vietnam has been considerably shortened. The river port and seaport systems capable of receiving heavy container ships, inland container depots (ICD) and bonded warehouses are upgrade or built. To date, 130 industrial zones and export processing zones and eight large economic zones have been planned and developed to exploit advantages, promote potentialities and prepare room for mammoth projects.

 

However, in several fields, investment still faces difficulties. For example, Ho Chi Minh City oriented to shift its economic structure from industry to service (banking, finance, trade and hi-tech production) but is yet to make success. The investment into these fields is normally conditional, which requires the consistence from two sides: the investor must have real ability, speciality and a good project while the local government is ready to accept and manage the investment. In fact, the contributions of the finance, banking, insurance, health and education are enormous but the projects of these fields are very sensitive. A suitable method to manage investment in a market-driven mechanism but minimise risks for both the investor and the country is not actually sought out.

 

Another difficulty is the labour matter. Due to the soaring price (CPI and GDP growths are almost equal), the salary for workers is a hard lesson for enterprises, especially in labour-intensive sectors like garment, textile and footwear, which lead to lower profit rates. On the other hand, the human resource training is also of a concern. If we want to attract high-tech investment, we must have a well-trained workforce to work for such projects.

 

Vietnam’s exports have grown very fast with an annual growth of above 20 per cent. The high growth rate requires a better infrastructure system to store and transport commodities in good condition and deliver on time. Especially fresh foodstuffs, vegetables, fruit and flowers must be kept in good conditions and shipped in the shortest period of time. Hence the slowness in developing the infrastructure system and building airports is obstructing export activities.

 

As for the Mekong Delta region alone, the highest obstacle is the transport system. The FDI capital for this region is still humble. The competition forces companies to choose the investment into low-cost fields. Meanwhile, the cost for building factories in Mekong Delta region is higher than other localities while the transport fee is high and transport time is long due to an unfavourable traffic system. At present, the Government is carrying out large transport projects in this region, not only upgrading and expanding the National Road 1A but also setting up, linking and upgrading inter-provincial roads to shorten distances between regional provinces and Ho Chi Minh City and South-eastern Vietnam. In the near future, this region must have expressways to facilitate the economic development and transportation activities for regional companies.

 

South-eastern Vietnam has taken shape into a focal economic zone. The 13-province Mekong Delta region has its own South-western Vietnam Steering Committee. However, to closely link regional provinces and to create a common image and a joint effort, the Steering Committee should operate effectively and act as a place of meeting, a information provider and a policymaker for the entire region. The Southern Foreign Investment Bureau is cooperating with the Steering Committee to carry out investment promotion activities on the basis of region linkage. In the past six months, the Bureau has organised Mekong Delta Investment Conference and will send an investment promotion delegation to Australia.

 

Vietnam is now joining the WTO and the investment situation will be very active; hence, we must make serious preparations. On the one hand, we actively call for FDI capital but we promote our internal forces on the other. If local companies are strong enough, they will be like a magnet to attract foreign partners. Infrastructure, human resource and market potentialities of domestic firms will help foreign companies to easily penetrate the Vietnamese market while financial capacity, technologies and export markets of foreign companies will assist Vietnamese firms to expand into the world more easily. This is the glue for sustainable and long-lasting cooperative relation.