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The US$1 billion Lego project and the FDI "filter"

The issuance of an investment certificate to Lego's ‘green’ project may open a new chapter in attracting foreign investment in Vietnam.

The US$1 billion project of Lego Group (Denmark) was officially awarded an investment registration certificate last week.

Mr. Matthew Powell, Director of Savills Hanoi, said that Lego only has five factories globally, so its decision to choose Vietnam as the destination for its new plant reflects Vietnam’s great success in attracting foreign direct investment (FDI).

"The fact that famous enterprises choose Vietnam as a strategic destination is important in promoting FDI growth, and at the same time, increasing Vietnam's reputation in the international arena," said Mr. Matthew Powell.

Moreover, Lego's $1 billion project is also of great significance in creating an important turning point for investment trends of the new generation - the era of the green economy and green growth.

Upon receiving the investment registration certificate, Mr. Preben Elef, Vice President of Lego Group, said that the project is developed sustainably by using solar energy, and it is the Lego Group's "most sustainable" factory in the world. 

Earlier, at the time the Memorandum of Understanding (MoU) was signed for this project, Mr. Carsten Rasmussen, Lego's Chief Operating Officer, said this would be the group's first carbon-neutral factory.

Not long before the signing of that MoU, Vietnamese Prime Minister Pham Minh Chinh, while attending the 2021 United Nations Climate Change Conference (COP26), made strong commitments on implementation of measures to reduce greenhouse gas emissions, aiming to bring net emissions to zero by 2050.

When Lego’s project was announced, experts all said that it was support of investors for Vietnam in implementing the country’s commitments at the COP26 and that this is a new generation of FDI that Vietnam is aiming for.

Lego's project is a new "green milestone" in the FDI inflows into Vietnam. It is important that domestic and foreign investors to attach importance to green and sustainable growth in their investment activities.

Vietnam's FDI "filter"

There must be a "filter" right from the start, so that Vietnam can decide on whether to choose a project. When summarizing 30 years of Vietnam’s FDI attraction, this issue was discussed. When the Politburo issued Resolution No. 50/NQ-TW on orientations to perfect institutions and policies, and improve the quality and efficiency of foreign investment cooperation, this issue became more significant.

In fact, many localities have said "no" to projects that are at risk of causing pollution and those using outdated technology. However, they are just independent decisions by local governments. 

According to Prof. Dr. Nguyen Mai, Chairman of the Association of Foreign Investment Enterprises, it is necessary to develop criteria at the national level, such as investment rate, use of labor, technology, and environment… to be able to choose better FDI projects.

The Ministry of Planning and Investment has submitted to the Government a set of criteria to select FDI projects. In addition to the criteria of investment rate/hectares of land, the number of employees, the high technology content of the project, the investor's commitment to technology transfer, and the ability to link with the domestic business sector, ensuring national defense and security and environmental protection is also emphasized.

“Most of these criteria have been institutionalized in the provisions of the Investment Law. Some criteria will be included in specialized laws by ministries," said a representative of the Foreign Investment Department (Ministry of Planning and Investment).

Also, a set of criteria to evaluate the effectiveness of FDI has been approved by the Ministry of Planning and Investment to the Government. This set of criteria includes 26 indicators, of which 18 are economic, 5 are social and 3 are environmental related.

For the environment, it includes indicators on the percentage of FDI enterprises applying energy saving measures; percentage of FDI enterprises applying ISO standards on quality management systems; and percentage of FDI enterprises meeting environmental standards on wastewater, emissions and solid waste.

These criteria, according to the Foreign Investment Agency, will help assess the impact of FDI projects on the environment and the measures businesses take to protect the environment. 

"Filtering" both inputs and strictly controlling outputs is a way for Vietnam to not only choose good FDI projects, but also "force" foreign investors to take greater responsibility and obligation to the Vietnamese society and economy. 

Dau Tu

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