Vietnam needs to select appropriate FDI projects

(ĐTTCO)-Problems concerning foreign direct investment (FDI) projects as such do not concern the Vietnamese economy, which leads to some people talking about a dual economy. Many FDI projects have not created or ensured sustainable and quality development. This means that the transfer of technology, transfer of skills, and the spill-over of FDI investment is still limited. 
Vietnam needs to select appropriate FDI projects

Mr. Vo Tri Thanh, former Deputy Director of the Central Institute for Economic Management (CIEM), spoke on various aspects of FDI projects with Saigon Investment in an interview.

JOURNALIST: - Sir, in 2019, the Politburo issued Resolution 50-NQ/TW to improve institutions, policies, and the quality and efficiency of Foreign Direct Investment until 2030. What changes did this Resolution bring about?

Mr. VO TRI THANH: - Resolution 50-NQ/TW has made a strong change and improvement in the orientation towards FDI investment in Vietnam. This Resolution clearly states the shift from quantity to quality. For example, by giving priority to projects based on latest technology, more focus on environment friendly projects, a higher spill-over of technology and skill-sets, and more links with domestic Vietnamese businesses. FDI inflow creates growth and development associated with economic restructuring, and currently Vietnam is in strong need of good sources of investments.

- Sir, is the current global political scenario, and the US-China trade war, together with the outbreak of the Covid-19 pandemic, creating more challenges for Vietnam in attracting FDI investments?

- All these factors are challenging, but at the same time they also are creating opportunities for us. These are FDI inflows that are shifting, constantly looking for attractive places to do business, and pour more effective investments in the right places. In the current context, we are seeing a shift from China. This shift also has the support of a number of countries with large FDI sources in China, namely, the USA and Japan. However, other countries also recognize that investments are shifting in trend, so they are also changing ways to attract FDI investments as there is a fierce competition in attracting this shifting FDI capital flow. The challenge for Vietnam is that it has strong competition from some ASEAN countries and India.

In this competition, it can be said that Vietnam has some advantages, but these should be made more attractive. At the same time, we must have a good partnership with other countries in the world, because foreign investors investing in Vietnam not only work with us, but also connect with the rest of the world. To fully exploit this investment shift, multinational corporations are looking at many options. Vietnam has been creating attractive grounds for FDI inflow with competitive incentives of international standards, but it still needs to make more effort. For example, Vietnam needs to provide good institutions, offer a more open business environment, create clear land space and a favorable investment location, and provide quality and more skilled human resources. All these facilities are not very easy to create, and thus, the problem of attracting FDI is not very simple.

Firstly, research shows that tax incentives will not have too much impact on attracting FDI, especially as investment flow is fundamental, methodical and long-term. Tax incentives are necessary, but not sufficient. We need to take into account other factors and advantages, such as human resources, infrastructure, ecosystem of industrial parks, degree of integration, and connectivity with the rest of the world through free trade agreements (FTA). These issues all require clear and transparent policies and programs, and must be well thought out before implementation.

Secondly, besides attracting good quality and more FDI inflow, it is necessary to create preferential policies to allow FDI investments to flourish in the country. This must be a firm commitment at an international level.

-  Sir, India is attracting a lot of FDI by offering huge platforms to big technology corporations. Why can Vietnam not do the same, and also attract high quality FDI?

- Competition is always a good thing. Competition adds a healthy pressure to self-improve and we must not shirk this. Perhaps the Indian media is creating a hype about the FDI flow, because of market economy pressure. Assuming that there are some corporations leaving Vietnam, of which we are a bit sad but not totally upset, because this is the rule of the game. When evaluating a problem, it is necessary to see many dimensions and many sides. We have to remain confident and compare internationally, and continue to strive to work even harder. Even without competition, we still have to work hard and do the best we can.

Whatever policies Vietnam adopts towards attracting FDI inflow, we need to first understand where our economy is, and at what level it is. Now, the key issue is how to select appropriate FDI capital, rather than ambitiously welcome large FDI corporations that perhaps may not flourish in our environment.

- Thank you very much.

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