Lai Thi Van Anh of the Ministry of Justice (MOJ), at a recent workshop on FDI attraction held last week held by the Vietnam Confederation of Commerce and Industry (VCCI), spoke about a foreign businessman who registered a project worth $200 million and submitted a document applying for a $200 million loan from a Swiss bank.

Anh said this was a document applying for a loan, not a document certifying the Swiss bank would provide the loan. However, the project still obtained a license from local authorities. This was proof of the lax selection methods of localities when they license foreign invested projects. 

Localities are not ‘filtering’ projects before licensing, he said.

VCCI said that over the last 35 years Vietnam has been an attractive destination for foreign investors, and FDI has played an important role in economic development.

The export value of the foreign invested sector accounts for 72 percent of total annual export turnover, thus helping Vietnam obtain a trade surplus in recent years. 

However, many problems have arisen recently.

Most foreign invested projects have small scale. As of the end of December 2021, there were 1,254 projects with capital of $50 million or higher, while tens of thousands of other projects have investment capital of below $50 million, accounting for 96.4 percent of total FDI projects. 

Only 5 percent of projects use high technologies, 80 percent medium technologies, and 14 percent low technologies.

Since 2006, Vietnam has been applying decentralization in licensing FDI projects, which allows localities to attract FDI. However, problems exist: localities compete to lure investors, offering incentives which go beyond the incentive framework set by the central government. 

Analysts have warned about the loose discipline by localities in choosing investors. They aim for short-term benefits and do not take into account long-term interests, and ignore national long-term interests. In many cases, they grant licenses to large projects, but the projects are implemented at a snail’s pace.

Phan Huu Thang, former head of the Foreign Investment Agency (FIA), said that Vietnam lacks detailed guidance and tools to help ‘filter’, assess and verify investment projects in localities.

Dau Anh Tuan from VCCI said that local authorities often choose projects based on their personal experience, and there are no standards and norms for them to assess projects.

Tran Thuy