Speedy reforms key to FDI rise: foreign experts

FDI is back soon

The comments came as a new report from the United Nations Conference on Trade and Development (UNCTAD) found FDI flow in Southeast Asia fared a little better than the rest of the world, dropping $1 billion between 2001 and 2002 to $14 billion.
Global FDI last year was down 21 per cent compared to 2001 to $651 billion. The report predicted global FDI flows would remain depressed this year, but rebound next year.
In another FDI report released last week, the Vietnam National Economic University and Japan International Cooperation Agency found that while many foreign firms cite Vietnam as a favoured investment destination, not few of them are reluctant to actually make investments.
The report also said Vietnam’s investment boom in the first half of the 1990s lasted only a few years followed by a sharp decline of FDI even before the Asian crisis began in December 1997. There have been signs of recovery in recent years but the upsurge in investment is not yet as robust as hoped.
UNDP economist Juan Luis Gomez said at the launch of the global FDI report that it was possible to facilitate and enhance FDI attraction and implementation in Vietnam but the country needed to speed up the improvement of its investment environment.
Gomez said Vietnam should try to lower business costs and improve infrastructure to lure more global FDI.
“Challenges also include creating a level playing field for domestic and foreign investment by narrowing the gap between law and implementation capacity by investing in the legal system and finalising and implementing the competition law.”

The Ministry of Planning and Investment (MPI) said registered foreign investment in Vietnam in the first eight months reached $1.6 billion, an 8 per cent increase on the year before but far short of the mid-1990s figure.
“At the present level, FDI in Vietnam is well below the critical level required to join Asian dynamism,” the report said.
Professor Kenichi Ohno, Japanese project leader in the joint JICA project, said the amount of foreign investment inflow was still too small for Vietnam to become an industrialised country although it had “extremely” good labour resources.
Ohno quoted Japanese Ambassador Norio Hattori as saying that Vietnam had the potential to industrialise and FDI was the key, but unless Vietnam’s FDI policy improved dramatically, growth could slow down.
Ohno asked for quick and dramatic improvements where possible as other countries such as China and many other ASEAN countries made great improvements in their investment environments.
“Improving everything is critical and takes too much time. So, Vietnam should choose four or five improvements and then advertise them.”
While asking for stable and predictable FDI policies, Ohno said a Vietnam investment promotion agency should be set up to market Vietnam to the world as the recent MPI restructuring was good, but not sufficient.
He noted that a Vietnam promotion agency would helpfully activate marketing and trouble-shooting for individual FDI cases.