Vietnam targets more FDI with new legal framework
Vietnam plans to improve its legal framework to create a favourable investment environment and help the state better manage these activities, said an official from the Ministry of Planning and Investment (MPI) at a recent seminar in Hanoi.
Since economic reforms began in 1986, FDI has played an important role in international integration and economic development, MPI Deputy Minister Dang Tien Dong said at the seminar.
After Vietnam entered the World Trade Organisation (WTO), FDI soared, but in 2011, registered FDI saw a year-on-year drop of 21.6% to US$15.6 billion and disbursement of FDI reached only US$11 billion–the same level as in 2010.
Registered FDI in 2012 rose 4.8% to US$16.35 billion while disbursement of FDI dropped to US$10.46 billion.
There was a recovery in 2013 with total registered FDI of US$22.35 billion, 36.7% higher than in 2012. Disbursement of FDI also increased 9.9% to US$11.5 billion.
However, many experts said the recovery was not sustainable and growth in Vietnam was lower than other regional countries. In the first four months of this year, FDI fell 41% to US$4.85 billion, whereas disbursement of FDI continued to grow by 6.7% to US$4 billion against the same period last year.
Additionally, almost all FDI projects in Vietnam are small and medium scale. FDI projects with capital of US$100-500 million accounted for only 1.51% of the total, while those with capital of between US$500 million – US$1 billion accounted for 0.19% and those with over US$1 billion accounted for barely 0.2%.
Do Nhat Hoang, director of the Foreign Investment Agency, said that although Vietnam has a strict licensing process for FDI, management of operations is not strict enough. He suggested the country should reform administrative procedures, improve infrastructure, develop the support industry and focus on training a high-quality workforce.
He noted Vietnam faces challenges in wooing investors, competing with regional and global rivals and simplifying administrative formalities.
To improve the investment climate and State agencies' capacity to manage foreign capital, participants agreed that obstacles in the way of investment procedures should be examined.
Director of the Central Institute for Economic Management Nguyen Dinh Cung stressed it is vital to restrict the withdrawal of business permits, adding that relevant agencies should only revoke the permits when necessary.
Chairman of the Vietnam Association of Foreign Invested Enterprises (VAFIE) Nguyen Mai said that various difficulties in managing foreign direct investment (FDI) enterprises would emerge if regulations on the establishment of such firms, especially those related to fields of business and minimum capital, were not specified.