Bar raised to usher in better investments

High-technology industries are topping the list of encouraged investment in Vietnam

Prime Minister Nguyen Tan Dung last week issued  Directive 1617/CT-TTg asking ministerial bodies and local authorities to “intensify” and “regulate” the management of foreign direct investment (FDI).

Dung’s directive aims to improve FDI quality and encourage projects to apply state-of-the-art and environmentally-friendly technologies.

During the past five years, Vietnam has emerged as a hot place for investment, with some $150 billion in committed FDI since 2006. The government, in 2009, issued a resolution outlining measures to effectively attract and manage FDI projects.

However, Dung said FDI management had not gone as expected, adding that many licenced projects were not appropriate, especially in golf course development, steel, forestry and mining sectors.

“Many projects were not carefully appraised in terms of technologies, environment impact and labour mobilisation, resulting in poor quality,” said Dung.

New FDI projects must effectively utilise natural resources, reinforce linkages with domestic enterprises, and lure investment into auxiliary industries, agriculture, preferential services, information and technology and hi-tech industries, according to the directive.

Dung asked local authorities “not to grant investment certificates to energy and natural resource-incentive projects as well as the ones which use outdated technology and can pollute environment.” The government will not encourage FDI projects in non-production sectors.

A survey released early this year by Vietnam Chamber of Commerce and Industry and United States Agency for International Development showed that 67 per cent of foreign-invested companies in Vietnam were involved in some form of low-end manufacturing. Only 13.5 per cent of FDI companies could be considered high-tech investors with sophisticated technology or equipment, according to the survey.

“The prime minister’s directive means that Vietnam will change its policy to maintain its position as among the top priority for investments in the world,” said Nguyen Mai, chairman of Vietnam Association of Foreign Invested Enterprises.

“The directive indicates that the government wants to remove all poor quality FDI projects,” he added.

With the directive, Dung ordered ministries and local authorities to inspect the disbursement of large-scale projects and prevent price transfer activities.

The directive also assigned the Ministry of Planning and Investment (MPI) to work with other ministries and provincial authorities to raise FDI attraction efficiency in the next decade.

Furthermore, the MPI, in collaboration with ministries of Industry and Trade, Finance, Construction and Natural Resources and Environment, will have to devise policies on supporting industries, tax incentives, price transfer prevention and natural resources management. Such policies must be completed within 2012.