New-generation tasks ahead for FDI in Vietnam

February 20, 2019 | 13:00
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The Fourth Industrial Revolution is exerting a powerful effect on foreign capital inflows to Vietnam, forcing the local government to issue far-reaching reforms in order to catch up with new-generation foreign-invested investment (FDI). Dr Phan Huu Thang, vice chairman of Vietnam’s Association of Foreign-Invested Enterprises, confirmed to Kim Huong that hi-tech processing and manufacturing, smart agriculture, healthcare, education and training, and renewable energy will be the hottest sectors for FDI in the coming months and years.
new generation tasks ahead for fdi in vietnam
Dr Phan Huu Thang, vice chairman of Vietnam’s Association of Foreign-Invested Enterprises

New-generation FDI is ­required by the government to be more ­selective and focus on sectors that utilise hi-tech and ­environmentally-friendly ­solutions. There are concerns that this will reduce the ­number of foreign-invested projects in the country. What should be done to ensure an increase in both the quantity and quality of FDI?

The new-generation FDI strategy aims to create breakthrough growth as well sustainable economic development based on the achievements and lessons of the country’s 30-year economic restructuring journey, along with FDI mobilisation and usage.

In my opinion, it is quite necessary to focus on the selection of FDI capital because in the long-term it would be counter-productive to exchange the environment and natural resources for momentary growth, as the price of such deals will be extremely high. This means we need a clear direction for FDI mobilisation for every sector and locality, while balancing capital and human resources.

In investment promotion, we should reduce unnecessary activities that cause waste and are costly. Recently, many investment promotion forums have been held across the country, announcing a lot of billion-dollar projects. However, the disbursement of these projects has failed to be controlled.

To remedy this, we need to add regulations to monitor the implement foreign-invested projects to narrow the gap between registered and disbursed capital. For example, specific criteria and requirements considering capacity, experience, and financial capability should be introduced to ensure the transparency and performance of foreign-invested projects, along with regulations on the timeline for capital contribution to ensure progress.

In order to improve the efficiency of this capital mobilisation channel, we should overcome the current shortcomings in the process of FDI attraction, such as the weak linkages between foreign-invested and domestic enterprises, relatively underdeveloped supporting industries, and environmental pollution. Generally, in addition to mobilising new-generation FDI, we also need to facilitate the private sector to develop.

What difficulties does Vietnam face in actualising its new FDI strategy, and how can the country overcome them?

Mobilisation of new-­generation FDI in the coming time would depend on many factors. In addition to desire and ­determination, we need to pioneer 4.0-ready human ­resources who can drive ­innovation, creativity, and proactivity.

Moreover, the implementation of other breakthroughs like institutional reform, ­infrastructure development, training human resources, and growing the private sector are all progressing at a slower pace than would be necessary under Industry 4.0.

Additionally, there are difficulties in the organisation and implementation of central policies and directives at the local level regarding the encouragement of the private sector, while the fluctuations of the world economy already have a heavy impact on the Vietnamese economy.

What urgent solutions does Vietnam need to implement to catch up with new-generation FDI?

In general, Vietnam needs to simplify investment ­procedures and develop ­synchronised infrastructure to create a premise to welcome new-generation foreign investment capital flows.

Besides, the country would need to be more selective in attracting projects, determining which projects are suitable for each sector and region, while simultaneously issuing methodical investment promotion programmes.

The volume of foreign capital attracted will also depend on this activity. Thus, it is necessary to build promotion programmes with a clear focus on interdisciplinary and inter-regional projects and products value chains. Sector-wise, local authorities need to suggest specific investment destinations to multinational groups and supply the necessary information to convince investors to invest in the country.

In addition, Vietnam also needs to open more training courses to create high-quality human resources to serve sectors where it aims to call for investment. In addition, local enterprises should be encouraged to co-operate with foreign-invested enterprises to learn from each other, to transfer technology, and receive support in training. Samsung’s training courses for local suppliers is an outstanding example for such co-operation.

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