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Government urged to raise bar on FDI project selection
The government has to say no to low-quality FDI projects and push ahead with the economic restructuring process in order to attract more foreign investment into the country, a senior economist said yesterday.
Speaking at a two-day conference on FDI held in HCM City, Nguyen Quang Thai of the Viet Nam Economic Science Association said the sector had revealed several shortcomings that needed to be addressed soon to achieve higher growth in coming years.
In the first eight months of this year, the country had licensed 658 new FDI projects with a combined capital of US$10.79 billion, a year-on-year increase of 41 per cent.
During this period, capital disbursement by FDI enterprises was US$7.25 billion, up 3.6 per cent.
"These are rather positive figures in the context of many challenges and fluctuations. They also prove the FDI sector's long-term development potential and the enterprises' unchanged interest in the Vietnamese market," Thai said.
However one major limitation in the sector was the unstable quality of its capital sources.
"Total FDI injected in Viet Nam to date is over VND10 billion, accounting for one-fourth of the country's total investment capital," Thai said.
"The ratio is considered to rather large compared to other countries. However, most of the FDI has been pumped into projects meant for implementing contract work (With imported raw materials, accessories and designs).
"As a result, in spite of creating 45 per cent of the country's total industrial production value, the FDI sector's industrial added-value accounted for only 40 per cent of the market value added," he said.
Another shortcoming was the active part played by the sector in increasing import of materials and creating semi-processed products, even as they made a significant contribution to expanding the country's export markets, Thai said.
At present, FDI enterprises'export value presents over 50 per cent of the country's total but a majority of their products are still semi-processed products, he noted.
"In addition, many of the FDI enterprises now have a tendency to shift their investment from production to trading in order to take advantage of the 100-million strong Vietnamese market potential, as well as benefits created by Viet Nam's free trade-related commitments to international trade organisations such as World Trade Organisation."
This had contributed to raising the country's trade deficit, he said.
Also, many FDI enterprises have not paid due attention to transfer of production technology as well as management experience to Vietnamese engineers, managers and workers as they'd committed to local authorities when applying for investment licences, Thai stressed.
They have also not done well in training workers, he added.
In recent years, FDI enterprises have employed about two million direct and indirect workers a year, but a majority of these employees were those with very little professional training. Moreover, they received no further training to advance their skills after being recruited.
Thai said that if these shortcomings were addressed properly and in a timely manner, it would not only benefit Viet Nam but also the FDI enterprises that were "true investors."
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