However, experts said that the projects’ influence on the economy is still modest, necessitating a change in mindset to lure investment. FDI has been poured into 18 out of 21 sectors and all 63 localities nationwide.According to the Foreign Investment Agency under the Ministry of Planning and Investment, the FDI sector’s contributions to GDP rose rapidly to 19 percent in 2016 from only 2 percent in 1992.
However, along with positive contributions, the FDI sector has also faced many problems, as attracting high technology has been difficult.
Wim Douw, a senior expert for trade and competitiveness policy at the World Bank, said that Vietnam’s FDI attraction over past years has depended largely on low-cost labour resources and investment incentives, while the quality of the investment has stayed low.
But the country’s advantages are fading, while the fourth industrial revolution is changing the world rapidly, he said, stressing that Vietnam should change mindset in calling for investment.
Le Duy Thanh, Vice Chairman of the People’s Committee of Vinh Phuc province stressed that Vietnam should prioritise environmentally friendly projects with modern technology and a strong effect on domestic growth.
The policies for attracting FDI must aim at promoting the domestic sector and establishing value chains to prevent the development of two sectors in one economy, or even two economies in one country. In addition, there is a lack of indicators to evaluate growth quality, as statistical figures still lacked reliability.
Tran Dinh Thien, Director of the Vietnam Institute of Economics, said Vietnam should not chase growth targets every single year but rather focus on the growth quality of a whole period. “The new period will need new drivers,” Thien said. “We need comprehensive changes in thinking and methods.”
Targets should be based on the international commitments and technology advancements, he added. Thien added that the most important goal is building a transparent Government.
According to Sebastian Eckardt, the World Bank’s Lead Economist for Vietnam, the Vietnamese economy was experiencing a cyclical uptick in growth accompanied by macroeconomic stability. But it also faces emerging structural headwinds, including slower labour force growth, weaker investment and lower productivity growth.
Vietnam should take advantage of cyclical uptick to strengthen macroeconomic resilience and enhance structural reforms to boost productivity growth and lift potential growth, he said.
Eckardt said that it was critical to enhance the business environment, deepen State-owned enterprise reforms and develop effective factor markets to modernise institutions and create a level playing field, including for the domestic private sector. Besides, investing in people and innovation is important to meet the demands of a modern industrial and increasingly knowledge-based economy, he said.
