FDI does not only mean money

The Ministry of Planning and Investment, though optimistic about the attraction of foreign direct investment (FDI), has identified seven problems in FDI attraction.

The mid term report reviewing the implementation of the 2006-2010 socio-economic development strategy released by MPI’s project on supervising and supporting socio-economic development showed that the registered and implemented FDI capital boasted a record increase in the past three years with the capital of each year higher than the previous year. This has led to the ratio of FDI to total investment capital in society increasing from 14.9 percent in 2005 to 31.5 percent in 2008.

“This shows the confidence of foreign investors in the transparent and favourable investment environment in Vietnam since it became the member of the World Trade Organisation (WTO),” the report reads.

Money not the most important goal

In the first seven months of the year, Vietnam attracted $10 billion worth of FDI, while the implemented capital reached $4.6 million, which is just equal to 18.8 percent in comparison with the same period of 2008.

However, according to Dr. Vo Tri Thanh, Deputy Head of the Central Institute for Economic Management (CIEM), it is not important now how much FDI is attracted, but rather how the capital is used.

Head of the Foreign Investment Agency under MPI Phan Huu Thang thinks that the figure of $10 billion of registered FDI in the first seven months of the year is not a negative figure at all. In fact, with the current conditions in Vietnam, the national economy can only absorb $10 billion every year. Meanwhile, in the first seven months, nearly 50 percent of this amount was disbursed, which should be seen as an encouraging result.

The seven latent risks

The report states that one of the issues of concern is decentralisation in the licencing of investment projects.

Since October 2006, local authorities have had the power to licence FDI projects. However, it seems that it is still not the right time for this as Vietnam still does not have enough necessary conditions: capable licencing bodies, supervisory capability and responsible licencing bodies.

The decentralisation scheme is one of the reasons for the seven latent risks in many projects registered in the last three years. The seven risks are 1/ the exaggeration of capital and profit 2/ the overuse of rare or seriously lacking resources, including land, energy, natural resources 3/ the damage and pollution of the environment 4/ the failing to come in line with long-term development strategies 5/ the use of backward technologies 6/ the grabbing of capital from the domestic private economic sector and 7/ the lacking of foreign currencies and exchange rate risks.

vietnamnet, vneconomy

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