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VN advised to change FDI tactics
If Viet Nam wants to improve the efficiency of foreign direct investment projects, it must change its policies, procedures and targets to attract capital, a conference heard on November 03.
In a conference titled "Foreign Investment and Private Economic Development: Experiences of South Korea and Taiwan", experts said the attraction of foreign direct investment (FDI) always had two sides, as the FDI policies of other countries were aimed at making the most of their investment and minimising the disadvantages, but Viet Nam had not succeeded in doing the same.
To improve the quality of FDI capital, Viet Nam should measure the efficiency of FDI attraction by focusing on the amount of disbursed capital rather than the registered capital, they said.
According to the Foreign Investment Agency under the Ministry of Planning and Investment, the country's registered FDI capital in 2008 reached a record high of nearly US$70 billion but the amount actually used was just $11 billion.
Phan Duc Hieu, Deputy Head of the Business Environment and Competitiveness Board of the Central Institute for Economics Management (CIEM), said there was always a difference between "registered capital" and "distributed capital".
In Taiwan and South Korea, investors were only permitted to complete investment procedures when they transferred investment capital into the country or territory, meaning the quantity of FDI announced was equal to the amount received, Hieu said.
CIEM deputy head Nguyen Dinh Cung said the regulation helped control the financial capacity of foreign investors.
In Viet Nam, foreign enterprises were simply required to complete procedures in line with the country's laws in order to be considered foreign investors. This gave rise to the distinction between "committed capital" and "disbursed capital".
The financial capacity of foreign investors is currently proved in a report submitted during the investment registration process. However, the quality of the reports has been a controversial issue.
Poor management capacity along with running a race to attract FDI resulted in localities licensing FDI projects on a grand scale without taking into account their long-term social efficiency, Cung said.
Centralised
He said that the management of FDI capital in South Korea and Taiwan was centralised.
In South Korea, FDI capital was managed by Invest Korea Bank and the Korean Business Centre, while in Taiwan the management authority was the Investment Committee under the Ministry of Economics. In Viet Nam, this task fell to local agencies.
Cung said South Korea's FDI target was set to develop high-technology and increase economic competitiveness, so the country gave investment priority to specific industries rather than localities.
However, other confer-ence attendees said that Viet Nam's targets were different from those of South Korea and Taiwan as here they were aimed at compre-hensive development without regional discrim-ination.
In general, the economic transformation process of East Asian countries was quite similar, except for its speed, Cung said. "We have to change our thoughts. This is a key and decisive factor. We should not wait for others to bring perfect change to us," he stressed.
According to the agency, the structure of FDI allocation in Viet Nam is not suitable with most hospitality and catering services, and real estate projects.
In 2009, hospitality and catering services was the most attractive field among foreign investors, luring $8.8 billion in capital. The real estate sector ranked second with $7.6 billion.
Meanwhile, FDI in the processing industry has decreased continuously from 70.4 per cent in total FDI in 2005 to 13.6 per cent in 2009.
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