Vietnam seeks measures to stem rapid decline in FDI
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After a record $71 bn in 2008, funds inflows fell sharply to $15.6 bn in 2011
The Planning and Investment Ministry is looking for effective measures to prevent a decline in direct foreign investment (FDI), according to a recent report in Dau Tu (Investment) newspaper.
Vietnam attracted US$10.49 billion worth of FDI at the end of last month, only 75.3 per cent of the FDI garnered in the same period last year.
Of the total, 881 newly licensed projects had registered $6.68 billion, showing a year-on-year drop of 36.7 per cent, and 359 on-going projects expanded their investment capital of $3.8 billion, a year-on-year increase of 12.3 per cent.
Do Nhat Hoang, director of the Foreign Investment Agency, said the country’s FDI inflow continued to drop in recent years and urged the government to set up effective and timely measures to stop this decline.
In 2008, Vietnam attracted a record number of FDI with $71.7 billion, but it fell sharply to only $23 billion in 2009, $20 billion in 2010 and $15.6 billion in 2011.
“This year, the investment ministry estimates that it will be very difficult to achieve $15 billion in FDI,” Hoang said. “There are only two months left before the year-end and it is not easy to attract an additional $5 billion.”
Dao Quang Thu, deputy minister of Planning and Investment, also admitted that registered capital of FDI enterprises, particularly those from South Korea and Taiwan, had decreased significantly.
A representative of the Dong Nai Province’s Management Board of Industrial Parks said recent FDI inflow from Taiwanese enterprises had dropped at least ten-fold, with only $20 million injected into the province in the last 10 months.
Vietnam is no longer the top-ranking destination for South Korean investors, having been replaced by Indonesia and Myanmar, investment counsellor Nguyen Minh Hien said.
Nguyen Van Ba, an official in charge of investment at the Vietnamese consulate-general in Osaka, Japan, said Vietnam was not the only “beautiful girl” in the region and was facing competition from Indonesia, Thailand and Myanmar.
Deputy Minister Thu expressed concerns about the drop in the country’s FDI at a time when the state budget and government bonds had become more and more limited.
“We need to find new measures soon to gain investors’ trust,” Thu said.
The ministry has proposed several measures related to areas such as investment promotion, investment preference mechanism and investment management in order to attract more FDI and to use it more effectively.
However, representatives of provinces have proposed measures that should be implemented immediately, in addition to the ministry's long-term measures.
The Dong Nai Investment Board of Industrial Parks suggested simplifying investment procedures in ways that could cut the time needed for ministries to verify FDI projects from up to 40 days to 15 days.
Current regulations on tax preferences for FDI enterprises should be reconsidered to encourage investors to expand their projects.
At present, expanded FDI projects do not receive tax preferences, according to the office.
Regarding this issue, Vu Dai Thang, director of the Economic Zone Management Department, also agreed that to stop the FDI decline it was imperative to adjust policies related to investment preferences and intensify investments in developing soft and hard infrastructure.
Soft infrastructure refers to human capital and institutions that cultivate it, such as community colleges and universities.
“Since 2008, Vietnam’s investment preferences have decreased significantly. Investments in local industrial parks were not given preferences, so this led to a decrease in FDI,” Thang said.
Reforming administrative procedures, particularly those related to land clearance, to reduce overlaps and contradictions among current legal regulations was mentioned by Lu Thanh Phong, deputy director of the HCM City Planning and Investment Department.
“We have asked FDI investors to fulfil statistical forms, but they are too complicated and dishearten investors,” Phong said.
The Binh Duong Province's Management Board of Industrial Parks proposed to adjust procedures related to taxation, customs and licensing for foreign workers in order to offer better care for investors.
