Investment engine is in for a tune-up

Red tape and poor infrastructure are just two of many obstacles facing investors

“To improve foreign direct investment (FDI) quality, we need to adjust the Investment Law and complete other decrees and circulars,” Bui Quang Vinh, Minister of Planning and Investment (MPI), told a VIR-led workshop on boosting FDI in Hanoi last week.

He said the MPI would work with other ministries to put forward proposals to the government and National Assembly to adjust FDI management laws.

“Our adjusted policy and incentives must match our target of attracting high quality FDI [into Vietnam]. There won’t be incentives for all FDI projects in every industry. The incentives will focus on projects which significantly contribute to the country’s industrialisation and modernisation,” Vinh said.

He said the MPI had proposed the government introduce measures to control local level FDI attraction. Vinh’s statement was supported by vice ministers of Science and Technology (MoST) and Transport, and a vice director of National Assembly’s Economic Committee.

Nguyen Van Lang, MoST deputy minister, told the workshop that current policies for attracting FDI were “inadequate”. This was particularly true in the high-tech sphere. “It’s time to review and reassess incentives and regulations on high-tech investments,”
said Lang.

The policy-makers’ sentiment comes at a time when FDI inflow is declining as the government looks to improve the investment climate. Newly committed FDI in first two months of this year reached $1.23 billion, down 55 per cent on-year, according to the MPI’s Foreign Investment Agency. FDI disbursement also fell 9 per cent on-year, hitting only a total of $1 billion for January and February. Foreign investors continue to complain that the investment legal landscape is messy, with many documents overlapping.

Meanwhile, Vietnam’s shift to attract high-quality FDI has received the thumbs up. “This is the right strategy at this time, but Vietnam has to change its policy also,” said JV Raman, chairman of Unilever Vietnam International Company. Raman said this course of action would enhance the confidence of investors in this country because the market had huge potential.

Raman underscored the firm’s achievements. After more than a decade of operating in Vietnam, Unilever had a turnover equal to 1 per cent of the country’s gross domestic product, or $1.6 billion.
“Vietnam’s advantages in terms of luring FDI remain.

They include cheap labour, geographical position, high economic growth and the size of the market. But the slowness of policy adjustment is the biggest obstacle to further improving the investment climate,” said Phan Huu Thang, director of Centre for Foreign Investment Studies at Hanoi National University.

He noted the task of revising Decree 108/2006/ND-CP guiding the implementation of the Investment Law had been started in 2008, but remained unfinished. “I hope the direction of Minister Vinh will accelerate the policy reform of FDI management,” said Thang.