Last year’s foreign direct investment (FDI) reached nearly US$18.6 billion, equal to 82.2 percent of the previous year. Although the country has not fulfilled the set FDI target of US$22-25 billion, the results still prove investors’ strong confidence in Vietnam’s business environment.
FDI disbursement boosted despite decreased inflow
Last year, around 55 nations and territories in the world poured their money in Vietnam. Singapore took the lead among major foreign investors with the total registered investment capital of more than US$4.4 billion, making up nearly 24 percent of the total FDI, followed by the Netherlands and the Republic of Korea.
The failure in fulfilling the FDI target is attributed to the world’s economic downturn, slow progress in upgrading infrastructure and human resources which do not meet investors’ demands. Another reason is that localities need to improve the effectiveness of their assessment when granting investment licenses, after a series of projects worth billions of US dollars have been implemented at a very slow pace. Dr Ha Xuan Tu, Deputy Head of the Department for Foreign Economic Relations under the Ministry of Planning and Investment further explains that the State’s objective is to promote socio-economic development along with environmental protection.
FDI disbursement continued to be in the spotlight last year. US$11 billion in FDI have been disbursed, up 10 percent compared to the previous year’s figure thanks to active and effective measures taken in recent time.
FDI projects should be carefully scrutinized
One of the alarming issues in the management of FDI businesses is that over 50 percent of them have claimed losses and that most of joint ventures turned out to be entirely foreign-invested. Despite proving that they had been claiming losses, they continued to expand their production and business activities, in fact, evading taxes. Many localities have withdrawn their investment licenses. It is necessary to devise policies to improve the quality of FDI, for example through preferential treatment to hi-tech projects, as well as projects that contribute directly in the country’s socio-economic development.
Director of the Foreign Investment Research Centre, Dr Phan Huu Thang says that it is high time that we carefully select these projects which meet the demands of the country’s socio-economic development and promote its industrialisation and modernisation process.
President of Foreign Investment Business Association, Dr Nguyen Mai says that the country should adjust its orientations and policies to improve the quality of FDI inflow into Vietnam. Priority should be given to projects in such fields as electronics, informatics, services and training of highly qualified human resource, and modern healthcare centres, as well as technical infrastructure.
With last year’s positive results, it is forecast that FDI disbursement is likely to reach US$11-12 billion this year with a registered capital reaching around US$20 billion. Deputy Minister of the Planning and Investment Dang Huy Dong affirmed that this year will focus on attracting large-scale projects with major partners, creating favourable conditions for Vietnam to increase the added value and get involved in the global value chain.
A lesson learnt from FDI attraction last year is to withdraw investment licenses of delayed or unfeasible projects. This way, the land can be used for feasibility projects that benefit the national economy as well as workers. This is also of the measures to improve the quality of FDI in 2011 and the following years, meeting the country’s demands for development in the near future.
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