According to the Foreign Investment Department under the Ministry of Planning and Investment, so far 82 countries and territories have invested in Vietnam with a total registered capital of more than US$80 billion.

About 50 percent of the current 8,590 projects worth US$83 billion are being implemented with a total disbursed investment capital of more than US$43 billion, accounting for 52.2 percent of the total registered capital.

Positive contributions

Head of the department, Phan Huu Thang, said that over the past 20 years, the foreign-invested sector has made remarkable contributions to national socio-economic development by bringing sustainable high revenue, high export value and generating jobs for many workers with stable incomes. However, the capital disbursement pace of foreign-invested projects is still slow and unstable from US$7.1 billion in the 1991-1995 period to US$13.5 billion in the 1996-2000 period, and US$14.3 billion in 2001-2005. In 2006 and 2007, the disbursed capital only stood at US$8.7 billion.

According to economists, the foreign-invested sector has played an important role in the national economy, making a great contribution to total social investment. It has helped to improve the balance of payments, raise production capacity, renew technology, increase export turnover and expand the country’s markets.

Asian Development Bank (ADB) Country Director Ayumi Konishi also agreed that the foreign-invested sector has had a huge impact on economic development in Vietnam, maintaining an average annual growth rate of 11 percent over the past 15 years, compared to the country’s GDP growth rate of 7.6 percent in the same period. Its contribution to the State budget increased from 2 percent in the 1990s to 13 percent in 2006.

Mr Konishi added that increased investment in high-tech projects by the US’s Intel Group, Taiwan’s Foxconn group and Japan’s Nidec group, shows Vietnam has gradually taken part in the added value production chain and increased the efficiency of the national economy.

Challenges

Despite its considerable contributions to national economic development, there are still many issues the sector has to resolve to attract and use this source of investment effectively.

The ADB official also stressed that it is essential to develop closer links between the foreign-invested sector and other economic sectors in Vietnam.

Mr Ayumi Konishi said, according to a recent survey released at the Vietnam Development Forum on supporting industries, Japanese enterprises can buy just 26 percent of spare parts in Vietnam compared to 47.9 percent in Thailand and 45 percent in Malaysia. The survey found that around 68.6 percent of Japanese enterprises questioned said that their most difficult problem in Vietnam is purchasing materials and spare parts in the country. Therefore, Vietnam should get much more involved in the production process to boost value-added exports. Another important factor is that foreign-invested enterprises are always willing to buy spare parts which are produced in the country. However, local enterprises cannot meet their high demand.

Dao Anh Tuan from Vietnam’s Chamber of Commerce and Industry said that over the past years, foreign investments in Vietnam are only focused on some big cities and provinces. Although 20 provinces in the country have attracted foreign direct investment (FDI), some other provinces have not had any FDI projects. This is attributed to poor in infrastructure and quality of human resources.

In recent years, although the number of FDI-projects licensed has increased rapidly, the capital disbursement pace of foreign investment capital remains slow due to shortcomings in the supporting industries, shortages of skilled workers, poor infrastructure, cumbersome administrative formalities and corruption.

Nguyen Van Quang, deputy director of the HCM City Economics Institute, said the government has not offered enough preferential policies to attract foreign investment. Investors from Asian and South East Asian countries have a higher proportion of FDI capital than those from European or American countries. This is because investment capital and technology are still far from meeting requirements for economic restructuring. 

A shift of focus?

Mr Ayumi Konishi said Vietnam will soon become an average income nation soon. Therefore, it is necessary to adjust development policies on production sectors which need a large number of skilled workers involved in hi-tech development projects. Vietnam should continue to improve its investment environment, carry out proper marco-economic policies and reforms to raise the competitive edge of the national economy, invest in research, and improve the skills of workers and the level of social welfare. 

The current tasks of attracting foreign investment include speeding up infrastructure construction especially under seaport and energy projects, carrying out administrative reforms in customs, taxation and land, developing highly skilled human resources, and completing the “one-stop shop” mechanism.