Vietnam to filter out FDI projects with national benefit

By Nguyen Hoai   October 5, 2018 | 05:00 pm PT
Vietnam to filter out FDI projects with national benefit
Employees work at the assembly plant of a foreign direct investment car factory in Hai Duong, Vietnam. Photo by Reuters/Kham
Vietnam will get selective with new FDI projects, rejecting those that don’t benefit the country, a senior official says.

Minister of Planning and Investment Nguyen Chi Dung said even though FDI projects have made remarkable contributions to the Vietnamese economy, there were several drawbacks to be dealt with. 

Many FDI projects focus on assembling, resulting in a low localization rate in some industries, Dung told VnExpress on the sidelines of the “30 Years of FDI Mobilization” conference held in Hanoi Thursday. 

"They have not transferred the technology to Vietnam, and there is only a small number of them using high technology that creates high added value."

Another problem is that a lot of pledged investments are not disbursed, Dung said, adding that as of last year, only 55.5 percent of the registered capital had been disbursed.

This means that almost half of the FDI projects have not or could not be completed.

Furthermore, some FDI businesses do not strictly abide by the laws on protecting the environment, causing serious pollution, which has had major negative impacts on people’s lives and the stable development of Vietnam, he said.

There were also FDI businesses that were dishonest and evaded tax, the minister added.

Sharing economy model

Dung said Vietnam should change its FDI strategy. “Instead of only focusing on traditional investment, the country should encourage non-traditional business models like the ‘sharing economy'." 

Vietnam should grab new technologies brought in by Industry 4.0, as well as new investment methods and new forms of business, he noted.

“We will not take in low-tech projects which are not environmental-friendly,” he said.

In order to make this change effective, Dung said Vietnam needs to complete its legal framework and policies to attract those businesses, and at the same time help local firms grow.

The country is developing policies that support local small and medium businesses to meet global standards so that they can partner with FDI businesses, he added.

Vietnam has made substantial changes in restructuring the economy and reforming growth models in recent years.

Equitization of and divestment from state-owned enterprises have been accelerated, while the domestic private sector was growing at a rapid pace.

These factors make Vietnam a long-term destination for foreign investors to expand their businesses, the minister stressed.

Speaking at a conference on “30 years of FDI mobilization” on Thursday, Prime Minister Nguyen Xuan Phuc said that by leveraging the current market and distribution channels that the FDI firms have, domestic investors acquiring a stake in such firms would be able to master new technologies and develop new management. Vietnamese firms can and should buy into FDI peers, the PM said. 

He said domestic enterprises should be encouraged to enter joint ventures, become capital contributors and purchase shares in FDI firms with advanced and new technologies.

As of now, 129 countries and territories have pledged to invest over $334 billion in 26,500 FDI projects across Vietnam.

The sector has created direct employment for nearly 4 million people and 5-6 million indirect jobs.

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