Binh Duong investors’ meet discusses FDI policy
Binh Duong investors’ meet discusses FDI policy
Viet Nam needs to update its legal framework related to foreign investment.
A conference in Binh Duong was told that changes need to be made in the context of the fourth industrial revolution and capital flow due to the trade war.
“Viet Nam is considered one of 12 nations in the world to have successfully attracted and used FDI to develop the economy and society,” Deputy Prime Minister Vuong Dinh Hue said in his speech at the conference titled Institutional and Policy Consultation on FDI in The New Context.
“FDI is an important resource to promote socio-economic development, encourages economic restructure and production, increases exports, takes Viet Nam into the global value chain, contributes to the State budget, creates jobs, improves the quality of human resources, helps stabilise the economy, and raises Viet Nam’s global profile.”
In the last 30 years, Viet Nam has attracted FDI of US$340 billion from 130 nations and territories around the world, of which $191 billion has already come in, he said.
FDI contributes 20 per cent of the country’s GDP and 18-25 per cent of gross capital formation, and created 3.6 million direct jobs and more indirectly, he said.
“However, links between foreign-invested and local enterprises are loose and the existence of two separate economic blocks poses a risk to the economy.”
“The technology transfer rate is very low, far below expectations, with only 5 per cent of foreign enterprises using modern technologies.
“FDI capital is focused on real estate, not important sectors like agriculture or high-value added segments.
“FDI projects are unsustainable in terms of the environment and low efficiency of land use.
“Transfer price abuses, illegal investment and lack of connection between urban areas and industrial parks cause great pressure.”
He assured that the Government is determined to update FDI policies.
“We would like to collect all ideas from local authorities, foreign enterprises and business groups to make the update.”
Tran Thanh Liem, chairman of the Binh Duong People’s Committee, said: “FDI projects have changed the province and promoted urbanisation of 80 per cent of the province, and there are no more poor people in Binh Duong.”
The province has attracted $32.5 billion in 3,500 projects from 64 nations and territories, and these companies contribute 20 per cent of the province’s GDP.
Le Thanh Liem, deputy chairman of the HCM City People’s Committee, said FDI has stimulated development of the local private sector.
“In 2000, the local private sector accounted for 29 per cent of the total investment, nearly the same as FDI. But in 2015 the figures were 68 per cent and 15.6 per cent.
“Domestic enterprises have adapted and learnt to compete squarely with foreign enterprises, even in the real estate industry, which requires huge capital and management skills.”
He said in future FDI must only be in labour-intensive projects to create jobs and stabilise society but greater focus on technology is needed.
“For the last 30 years FDI has been attracted successfully due to political stability and the Government’s will to carry out economic reforms. In future Viet Nam should focus on infrastructure and transparent regulation.
“We should have policies to attract more multinationals to make Viet Nam an international finance, science, technology and logistics centres.”
Kyle Kelhofer, the International Finance Corporation’s country manager for Viet Nam, Cambodia and Laos, said: “As a percentage of GDP or per capita, Viet Nam’s FDI inflows already exceed those into China or India and most large ASEAN countries.
“However, FDI linkages are still weak as reflected by limited domestic value addition, especially in more sophisticated sectors.”
He said key new global trends like industry 4.0, free trade agreements, offshoring, and new forms of FDI would “increase opportunities to tap into global value chains and sources of finance, to absorb inward FDI from MNC de-risking and restructuring supply chain for Viet Nam.
“However, automation and AI reduces labour in manufacturing and services, reducing the advantage of low labour-cost countries like Viet Nam.
“This implies that the country needs to focus on attracting FDI in businesses which generate higher wages, lead to increased local skills development, technology transfer and R&D and stimulate more efficient use of resources.
“It will also create opportunities for local entrepreneurs and investors to work with international companies as part of global value chains, and do not displace local investors and SMEs.
“Concrete action will be required in eight key areas: introducing concrete policies that increase FDI linkages and spillovers; implementing a major skills supply push to enable next generation FDI; introducing strategic outward FDI promotion policies; building a ‘next generation FIA” to lead strategy implementation; overhauling the current incentives framework; modernising investment promotion and prioritising sectors for pro-active promotion; and opening up sectors to FDI that underpin competitiveness and growth.”
Virginia B. Foote, co-chair of the Viet Nam Business Forum and vice chair of the American Chamber of Commerce, said: “Foreign and domestic investors need a level playing field, not only to attract more investment in future but also to maintain the investment that is already here.
“We recommend that Viet Nam move immediately to internationally accepted general accounting standards, adopt and implement the long-awaited OECD type Advanced Pricing Agreement,the law is in place but no APAs have been awarded.
“We also highly recommend Vietnam incorporate OECD standards on transfer pricing and the upcoming recommendation by OECD on the taxation of on e-commerce. These are complicated areas, but global standards are key to companies in or entering global supply chains.”
“We will continue to work on lowering barriers to trade, to help the Vietnamese government make it easier to do business, and to create a high-standard, transparent, and stable business environment to ensure that our investors and all the people to have fair access to that opportunity.
Choi Heung Yeon, deputy chairman of Korean Chamber of Commerce and Industry in HCM City (KOCHAM) said: “South Korea is the biggest investment country in the cumulative investment with the most number of FDI in Viet Nam with over 7,000 FDI companies. And the two nations’ bilateral trade volumes were $65.7 billion in 2018, accounting for 13.6 per cent of Viet Nam’s total trade volume,”
“The approval delay for the development projects of investment companies which have been investing for a long time in Viet Nam is also another problem.
“I would like to talk about technology transfer. Korean companies have been making great efforts to nurture the material parts industry as well as SMEs, and to transfer technology, which are the issues that Vietnamese government is much interested in.”
“In order to transfer technology, it is a well-known fact that the abundant demand and supply of professional and technical personnel is very essential. In the future, there will be a large number of the specialised engineers in the fields of electricity, electronics, semiconductor, IT and automobile industry.”
However, it will not be easy for Viet Nam to be transferred and acquire the technological know-how of companies in a short period, which have accumulated technology for decades or more,” he said.
Kadowaki Keiichi, chairman of the Japanese Chamber of Commerce and Industry in HCM City said: “The Vietnamese Government should have incentive policy to promote Japanese enterprises investing into support industry as well as promote connecting demand and supply between Japanese and Vietnamese by setting up a database.
“Regulation on date of used-machine should be lifted.”
Social insurance for foreigners should be carefully considered whether they move from one to another company of the same corporation to avoid the fact that all foreigners must pay social insurance in Viet Nam, he said.
