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Administrative reforms a must to encourage FDI
Nguyen Dinh Cung, Vice Director of the Central Institute for Economic Management, talks to Dau Tu (Viet Nam Investment) newspaper about attracting higher levels of international investment.
FDI to Viet Nam this year is less than the same period last year. Is this due to the global economic downturn?
In my opinion, the greatest cause of the reduction in FDI flowing into Viet Nam is the global downturn. As the global capital source fell, investors decided to cut investment in other countries.
Furthermore, some even restructured their business plans, including their investment plans. Even when their investment projects had already been registered in Viet Nam, they changed their plans in response to the global economic situation.
How about the matter of Viet Nam’s infrastructure?
The problems of infrastructure, labour and administrative reform are what limit investment here.
These problems have been there for quite a while. However, in the current situation when foreign investment is reducing and competition for investment is increasing, it is essential to deal with them.
Which problem should be resolved first?
I think the first one we need to tackle is administrative reform. It doesn’t require much money. All it requires is determination and synchronisation between ministries and agencies. The problems of infrastructure and labour need more mid – and long-term solutions. Opening another port or expanding a transport route is only a partial solution. Training a new generation of labourers could require five to six years.
A breakthrough in administrative reform could open up the investment environment. And when investment is stronger and bigger, it would help solve the infrastructure and labour problems.
When talking about the financial crisis in Viet Nam, Paul Krugman, the laureate of the 2008 Nobel Prize for Economics, warned that Viet Nam needed to be careful if FDI flow gets too strong because it could indicate a looming crisis. What is your opinion on this?
When talking about foreign investment capital, there are two different types: financial investment capital and investment capital in manufacturing.
The flow of financial investment capital goes in and out very strongly, thus it affects directly the macro economy.
When it comes in too strongly, it could create "bubbles" in the domestic financial and real estate markets. When the bubbles burst, a crisis is very possible. I think we have to pay close attention and have good control over the flow of investment capital. On the other hand, FDI in manufacturing is not a problem.
VietNamNet, VietNamNews
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