FDI in Vietnam in the Eyes of Experts and Investors

 

The Government has already issued $6.49 billion of investment licences this year by mid-October, achieving almost the full amount of the year's target for foreign direct investment (FDI) of $6.5 billion two months ahead of the schedule. This represents a year-on-year increase of 41.4 per cent in FDI. So obviously, there must be something very positive in the present investment environment resulting in this strong performance. I think this reflects the investors' confidence and expectations for Vietnam's potential both as the venue of production and also as a market.

 

There are four major concerns that need to be addressed. One is the weak infrastructure. Industry requires stable and sufficient supply of energy, as well as efficient transport infrastructure. The second is the overall regulatory framework including the issues of State owned enterprises. The current regulations require so many days for new business to register. If the playing field is not levelled between private businesses and State owned enterprises, that would also strongly discourage foreign investment to come in. The third is the weakness of the financial sector or ineffective financial intermediation. Vietnam needs to reform its banking sector and also accelerate the development of the capital markets. The fourth is the need to improve education system. For Vietnam's continuing growth, and particularly to attract more foreign investment, Vietnam has to improve its supply of qualified human resources.

 

As Vietnam is being integrated into the global economy with the accession to WTO, Vietnam needs to step up its efforts to enhance its competitiveness, and the four areas noted above are the essential ingredients for Vietnam to become more competitive. Vietnam can no longer be simply satisfied with its own achievements but "relative" performance against other countries will also be very important as other countries are also making serious efforts in improving their investment environment.

“Reforms need to continue,” Mr. Nguyen Minh Nguyen, Manager Investment Banking Division of Golden Bridge Finance Group

 

Vietnam’s present investment environment now is much more open and transparent compared to the past. Especially regarding legal aspect, when the new laws on investment and enterprise are constructed and become effective, it is equal between domestic and foreign investors. Some procedures are changing leading to the easiness to carry out the investment process. With GDP growth rate of 7-8 per cent in recent 5 years, Vietnam proves to be one of the most attractive destinations in the region for foreign investors. However, it still needs more dynamic actions from the government to enforce the legal framework and unify the legal systems to make them more effective. 

 

Firstly, it should continue to strengthen the reform of the public administrative system to conduct and instruct the implementation of administrative procedures relating to investment process. Secondly, it should build up a unified and consistent legal framework, such as the consistency from laws to degrees to circulars regulating businesses.

 

Since Vietnam began the open-door policy, especially in 1987 when the three-amended Foreign Investment Law took effect, the Vietnamese investment environment has breakthrough changes. The number of FDI companies jumped from several hundreds to 6,300 with a combined investment capital of over US$60 billion, including more than 3,000 companies with a total investment capital of over US$35 billion that have been put into operation. The law system and related policies are continuously amended to attract foreign investment. Especially, in recent years, the Vietnamese investment environment has profound changes to become more attractive to investors and more suitable to international practices. Later investment projects increased in quantity, quality and size. Previously, the average size of a project was about 2.3 million but now it has increased to US$5.7 million. Some projects worth even billions of US dollars.

 

The farthest breakthrough in improving the Vietnamese investment environment is the parliamentary ratification of the Common Investment Law and Unified Enterprise Law, which do not discriminate economic sectors. This brings in a gust of wind for waves of investment into Vietnam. Giant investors from Japan, South Korea, Europe and America are penetrating Vietnam, especially Japanese investors.

 

However, Vietnamese companies are still waiting for the implementation efficiency of these two laws. If it is good, foreign investors will feel at ease when doing business and building long-term business strategies in Vietnam. Enterprises need the Government to extricate difficulties and apply one-door administrative mechanism, especially at the local level.

 

The Vietnamese investment environment has been improved considerably in recent years and the procedure is streamlined and more transparent. However, many foreign investors still feel hesitant about some issues in Vietnam, including rampant corruption and complicated taxation system. Besides, another concern of foreign investors is the social commerce. When a company introduces a product or service in Vietnam, it must pay attention to the market and advertisement. However, the advertisement law is changeable.

 

The other matter is related to the tax management. Previously, representative offices were under the management of the tax workgroup of the department of trade but now the management is given to other authorities. Each organisation has its own style of working; hence, companies will feel perplexed at the new change.

 

To make investment environment in Vietnam more attractive to foreign investors, I think, apart from licensing investment and creating an easy investment environment, the Government should improve the tax and advertisement systems, and create favourable conditions for companies operating in Vietnam or coming to Vietnam.