The Politburo, Vietnam's supreme decision-making body, has requested foreign investments to undergo thorough scrutiny for their possible implications to national security.
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According to the resolution, foreign investment has contributed significantly to state budget revenue and macro-economic stability. However, the existing policies have not fully reflected the actual practices, including fragmented and inconsistent incentive policies, as well as inefficient dispute-settling capabilities from government agencies.
The resolution also pointed out that the majority of foreign investment projects are of small scale, utilize low technologies and mostly are in labor-intensive sectors. Moreover, the ratio of actual FDI disbursement to registered capital remains low, while the share of the foreign invested sector as per state budget revenue is on the decline.
There has been growing trend of foreign projects involving in transfer pricing or implying risks of trade fraud, not to mention those violating working or wage policies.
The Politburo attributed these shortcomings to the lack of awareness in promoting high quality foreign investment projects, and overlapping regulations, among others.
Under this regard, it is essential for Vietnam to be selective in approving FDI projects, focusing on those using modern and environmentally-friendly technologies which would create high added value with positive spill-over effects, allowing local companies to integrate deeply into the global supply chain, stated the resolution.
The Politburo requested the upcoming FDI strategy to ensure mutual benefits of foreign investors and domestic economic sectors through multilateralism and diversified partners.
Measures to attract high quality FDI projects
For the new strategy to fulfill its objectives in Vietnam’s next phase of development, the Politburo outlines a number of measures.
First, a screening process is required to prevent issues relating to investors with limited financial capabilities, high risks of transfer pricing and trade frauds.
Second, investment should be promoted based on a comprehensive review, including possible implications to national security.
Third, government agencies are required to draft a list of areas restricting foreign investments in compliance with Vietnam’s international commitments. Other than this list, foreign and domestic investors are treated equally and fairly.
Fourth, each sector and province to has to devise sets of criteria for foreign projects.
Fifth, projects using obsolete technologies or posing risks to the environment would not be considered for expansion or validity extension.
In addition to these measures, the Politburo requested to include measures protecting rights of foreign investors in terms of intellectual property, assets and capital, but at the same time clarifying the responsibilities of investors in environmental protection during the project implementation.
The Politburo sets target for FDI commitments in the 2021 – 2025 period at US$150 – 200 billion, averaging US$30 – 40 billion per year, and disbursement of US$100 – 150 billion during the period.
In the 2026 – 2030 period, FDI commitments would reach US$200-300 billion and disbursement of US$150 – 200 billion.
The rate of enterprises using advanced and environmentally-friendly technologies, as well as modern corporate governance to increase by 50% by 2025 and 100% by 2030 against 2018.
The rate of labor force undergoing training in the economy is expected to jump from 56% in 2017 to 70% in 2025 and 80% in 2030.
