Business
Vietnam to look for new strategy in FDI attraction
As Vietnam is entering a new phase of development, the government focuses on new strategy in FDI attraction, with more attention to quality instead of quantity, as such, FDI enterprises should contribute more to the human resources training and technology transfer.
According to the Vietnam’s Association of Foreign Invested Enterprises (VAFIE), provinces/cities with large scale foreign direct investment (FDI) projects, such as Bac Ninh, Thai Nguyen, Vinh Phuc, Hai Phong, Thanh Hoa (in the north), Binh Duong, Dong Nai (in the south), the contribution of FDI sector has basically transformed the economic structure of each province and city. For example in Bac Ninh, thanks to efficient attraction of FDI, in recent 5 years, Bac Ninh has transformed from an agricultural province to an industrial province, as agricultural activities contribute to 8% of the economy, while industrial activities and services contribute for 82%.
However, besides positive results, reality shows that FDI enterprises also have disadvantages, or even negative influences such as environmental pollution and using obsolete technology. The rate of FDI disbursement is still low compared to the registered capital; the use of resources is still wasteful, and limited projects using modern technologies.
As such, VAFIE suggested the government to have new strategy in attracting FDI. Specifically, while there are still priority for sectors requiring large number of employees in underdeveloped provinces, it is necessary to focus on calling for FDI in sectors with high technology requirements, creating high added value such as Information & Technology (IT), Internet of things, artificial intelligence, virtual reality, augmented reality, cloud computing and massive data analysis, training & education of high qualified human resources, research & development, community health care. With this being said, it is necessary to modify preferential policies, especially for provinces with advantages of developed industry and services with high added value. In other way of saing, these provinces should not consider FDI projects using large amount of employees, causing environmental pollution and green house gaas emission. For underdeveloped provinces/cities, FDP projects with low added value can still be considered, but enterprises have to ensure environmental protection.
Many experts also suggested to orients FDI attraction in sustainable way, not only for economic purpose, but also for society and environment. Instead of looking fo quantity as before, the government should now look at the quality and sustainable development. Besdies, another factor to consider is the growing trend of Mergers & Acquisitions activities (M&A), which is estimated to be at 4.16 billion USD since the beginning of 2017, and going to the 5 billion USD – mark. This trend will only grow in the futuer. Direct and indirect investment will no longer be different, which can impact to the FDI attraction policies in the coming time.
Bearing this in mind, FDI enterprises should pay more attention to their responsibilities to give something back to the society, and set aside a portion of their revenue to train human resources and transfer technologies. Recently, the government has encouraged Foreign Direct Investment (FDI) enteprises to increase cooperation with domestic enterprises, with an aim to spread the effect of FDI to the economy as a whole. After 30 years of the government’s effort in attracting FDI, there remains work to be done to increase the efficiency of this important fund to the economy.
One of the reasons for only few Vietnamese enterprises to take part in FDI enterprises’ supply chain is that they still lack the confidence and belief in their own capabilities. All of these have lead to Vietnamese enterprises do not reach out to cooperate with FDI enterprises, so that they have not really taken part in the FDI enterprises’ supply chain process.
In addition to the lack of confidence, Vietnamese enterprises would need to have long term strategy for development, being able to quickly adapt to requirements of FDI enterprises; continuously improving capabilities in the context of global integration. Besides, the government also needs to increase the role of associations and organizations in connecting domestics enterprises and FDI enterprises.
However, besides positive results, reality shows that FDI enterprises also have disadvantages, or even negative influences such as environmental pollution and using obsolete technology. The rate of FDI disbursement is still low compared to the registered capital; the use of resources is still wasteful, and limited projects using modern technologies.
As such, VAFIE suggested the government to have new strategy in attracting FDI. Specifically, while there are still priority for sectors requiring large number of employees in underdeveloped provinces, it is necessary to focus on calling for FDI in sectors with high technology requirements, creating high added value such as Information & Technology (IT), Internet of things, artificial intelligence, virtual reality, augmented reality, cloud computing and massive data analysis, training & education of high qualified human resources, research & development, community health care. With this being said, it is necessary to modify preferential policies, especially for provinces with advantages of developed industry and services with high added value. In other way of saing, these provinces should not consider FDI projects using large amount of employees, causing environmental pollution and green house gaas emission. For underdeveloped provinces/cities, FDP projects with low added value can still be considered, but enterprises have to ensure environmental protection.
Many experts also suggested to orients FDI attraction in sustainable way, not only for economic purpose, but also for society and environment. Instead of looking fo quantity as before, the government should now look at the quality and sustainable development. Besdies, another factor to consider is the growing trend of Mergers & Acquisitions activities (M&A), which is estimated to be at 4.16 billion USD since the beginning of 2017, and going to the 5 billion USD – mark. This trend will only grow in the futuer. Direct and indirect investment will no longer be different, which can impact to the FDI attraction policies in the coming time.
Bearing this in mind, FDI enterprises should pay more attention to their responsibilities to give something back to the society, and set aside a portion of their revenue to train human resources and transfer technologies. Recently, the government has encouraged Foreign Direct Investment (FDI) enteprises to increase cooperation with domestic enterprises, with an aim to spread the effect of FDI to the economy as a whole. After 30 years of the government’s effort in attracting FDI, there remains work to be done to increase the efficiency of this important fund to the economy.
One of the reasons for only few Vietnamese enterprises to take part in FDI enterprises’ supply chain is that they still lack the confidence and belief in their own capabilities. All of these have lead to Vietnamese enterprises do not reach out to cooperate with FDI enterprises, so that they have not really taken part in the FDI enterprises’ supply chain process.
In addition to the lack of confidence, Vietnamese enterprises would need to have long term strategy for development, being able to quickly adapt to requirements of FDI enterprises; continuously improving capabilities in the context of global integration. Besides, the government also needs to increase the role of associations and organizations in connecting domestics enterprises and FDI enterprises.
