Vietnam would take slower, wiser steps in attracting FDI

Vietnam would take slower, wiser steps in attracting FDI

The head of the Ministry of Planning and Investment, when admitting that Vietnam has lagged behind the neighboring countries in attracting foreign direct investment (FDI), has reassured the public that Vietnam has become “wiser” in licensing foreign invested projects.

“We have become wiser with stricter regulations, which can explain why the gap between the registered FDI capital and the implemented capital has been narrowed,” Bui Quang Vinh, Minister of Planning and Investment, said, citing the figure about the disbursement in the first 7 months of the year.

Vinh means that with the new policies, Vietnam has become choosier in licensing foreign invested projects to be sure that the registered projects would be implemented in reality instead of remaining on paper.

Vietnam was once an attractive destination for foreign investors 20 years ago with the cheap labor force and the rich natural resources. However, these have become no longer the advantages of Vietnam in attracting foreign investment.

Meanwhile, the government of Vietnam has decided to be more selective when receiving foreign investment. It now focuses on attracting high technology projects and would say “no” to the projects which may cause the environment pollution.

Vietnam has been taking slow steps…

The FDI to Vietnam only amounted to 6 percent of the total FDI into South East Asian in 1990-2000. However, the figure then soared to 10.29 percent in 2005-2010, reaching the highest peak of 17 percent in 2008.

Later, the FDI witnessed a setback in 2009, which then kicked off a downward tendency until now.

The decrease in the FDI to Vietnam can be seen most clearly in 2011, when the registered FDI capital was $14.7 billion only, a sharp fall of 26 percent over 2010.

The alarm bell over the decline in FDI was only rang when experts warned that more and more foreign enterprises shut down their factories in Vietnam to leave for other regional countries.

The Prime Minister said at a government regular meeting in late 2012 that if Vietnam does not renovate the investment environment, it would be inferior to other countries in attracting foreign investments.

According to the former Deputy Minister of Planning and Investment Nguyen Mai, Vietnam, the country which once had the most attractive investment environment, now has the investment environment worse than other countries which had the same start points in the region.

The faint hope

The recovery of the FDI in the first seven months of the year has raised a high hope on the possibility of Vietnam of returning to the golden age in attracting FDI several years ago.

However, Mai calls this the “faint hope,” because Vietnam still cannot do much in improving its investment environment to attract investors.

Analysts have also commented that the recovery of the FDI in recent months still cannot make the FDI picture brighter. Vietnam has been degrading in the competitiveness ranking. In the WEF’s 2012-2013 report on the global competitiveness, Vietnam ranks the 75th, a fall of 10 grades from the 65th position in the previous year.

It’s clear that Vietnam has to take slower steps. But will it become wiser in attracting FDI?

vietnamnet