Vietnam should have savvy foreign direct investment (FDI) policies that direct capital to modern and environmentally friendly technologies and promote technology transfer to make local firms more competitive, experts say.

They say it was a good sign that the manufacturing and processing industries were drawing significant FDI sums. Statistics compiled by the Vietnam Foreign Investment Agency show that in the first quarter of this year, nearly 85 % of registered FDI, or US$6.54 billion, went to manufacturing and processing industries.

According to Tran Van Tho, economics professor at Waseda University, Tokyo, FDI has a significant role to play in promoting domestic industries and driving economic growth.

“However, if Vietnam does not have wise FDI policies, the economy will be at risk of depending heavily on foreign companies and domestic firms will fail to accumulate resources like technology and capacity,” Thọ was quoted by a recent Vietnam News Agency report as saying.

He said this might lead to distortions in the economic structure in the long term and the industrialisation process would not be sustainable.

“External force is important but it is the inner force that decides,” Thọ said.

He said that Vietnam’s industrialisation process was currently heavily dependent on foreign investment, but the FDI sector was not closely linked to the national economy.

Tho citied statistics showing that FDI accounted for 50 % of the country’s industrial output and 70 % of exports. Some export products, like mobile phones, were solely FDI.

He said that Vietnam would need to have policies that encourage FDI inflow into high quality hi-tech production and technology transfer.

Nguyen Thi Tue Anh, Deputy Director of the Central Institute for Economic Management (CIEM), said that the FDI sector was not linked closely with domestic firms, which hinders technology transfer. At the same time, domestic firms had not engaged deeply with the supply chain of the FDI sector in Vietnam.

“It is important that FDI attraction is targeted at promoting technology transfer and improving competitiveness,” Tuệ Anh said, adding that policies should direct investment to environmentally friendly and hi-tech sectors.

“Rapid globalization and the fourth industrial revolution requires Vietnam to be selective in FDI attraction, with a focus on quality rather than quantity,” he said

Other experts, meanwhile, said it’s time Vietnam focused on attracting investment from giant corporations in the world.

They noted that with the Government hastening efforts to improve the investment climate, Viet Nam was becoming more attractive to foreign investors.

In the first quarter of 2017, FDI surged to US$7.71 billion, jumping 91.5 % over the same period last year.

Economist Nguyen Mai was quoted by the Nhan Dan (The People) newspaper as saying: “We should not worry about how to attract FDI but focus on selecting the best projects.”

However, the problem was that the licensing of many FDI projects was now under local authorities, with the result that many poorly-performing projects had been approved.

This showed that the Government should act fast to issue regulations that direct FDI attraction and other mechanisms towards enhanced supervision and project efficiency, Mại said.

FDI to HCM City up 56.7%

HCM City attracted $574.71 million in FDI in the first quarter of 2017, a year-on-year increase of 56.7 %, according to the municipal Department of Planning and Investment. 

The city granted investment certificates to 141 projects with a total investment of $133 million and 42 existing projects with a combined capital of over $89 million. Besides, it approved 401 foreign investors’ registration to contribute capital, purchase shares and buy back financial contributions from the city’s firms to the tune of $352 million.

Malaysia topped the city’s FDI sources with over $44 billion (33.3 % of the total), followed by Japan with $29 billion (22 %) and the Netherlands with $16 million (12 %). Information and communications sector was the top sector, luring $51.77 billion, or 38.7 %, as much as 3.1 times over the same period last year.

The city’s Planning and Investment Department has launched an online investment registration system for foreign investors who want to contribute capital to firms in the city. After five months of operation, the system received 432 documents. The second phase of the programme will include other procedures.

Regarding domestic investment, more than 7,900 new enterprises with a total registered capital of VND99.4 trillion ($4.3 billion) were licensed by the city, up 14 and 61.7 % respectively over corresponding figures last year.

VNS