Ktetaichinh’s Blog

January 1, 2010

FDI’s 10 most outstanding features in 2009

Filed under: Uncategorized — ktetaichinh @ 5:00 am
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VNBusinessNews.com – For the first time in the last five years, Vietnam experienced a decrease in foreign direct investment (FDI during 2009). Expansion plans by 72.94 percent of foreign invested enterprises (FIEs) are in the works, however, according to a poll conducted by the Vietnam Chamber of Commerce and Industry.

Here are the 10 most outstanding features in FDI picture, according to Thoi Bao Kinh Te Vietnam.

Prime Minister opens dialogue with foreign investors

On April 20, 2009, the Vietnam Business Forum took place in Hong Kong, where Vietnamese Prime Minister Nguyen Tan Dung spent nearly one hour to talk with foreign investors.

The forum connected Hanoi, HCM City, London (UK), Geneva (Switzerland), Tokyo (Japan) and Singapore, demonstrating the interest in Vietnam of the international community.

The PM emphasized that Vietnam attaches high importance to ODA (official development assistance) and FDI capital, which are the main capital sources for the development of Vietnam.

Foreign investors can access domestic capital sources

In April 2009, the Ministry of Planning and Investment and Vietcombank agreed to create the best conditions for foreign investors to access financial services at domestic banks.

The move is believed to support investment and promote foreign investment capital disbursement, especially in the crisis period.

Many investment licenses revoked

The withdrawal of Singaporean SP Chemicals (SPC) from an $11 billion project was a big event of 2009, but the petrochemical project is not alone. Many other investors have stopped their projects or delayed them due to difficulties in capital arrangement.

Japanese Riviera Corporation withdrew from the project on building Lotus Hotel in Hanoi, Luxembourg’s Coralis Group quitted the project on Hanoi City Complex

Bac Ninh province has reportedly revoked licenses for seven projects, Quang Nam five, Kien Giang three, Lam Dong one and Danang one project.

Problems in decentralization

The decentralization plan in licensing FDI projects has been set up to simplify procedures for investors, but led to fierce local competition to lure foreign investment. Provincial authorities have offered many incentives that sometimes exceed the parameters set by the Ministry of Planning and Investment.

Competition has also led to authorities easing conditions to lure investors, no matter the cost and burden to land, natural resources and infrastructure.

Decentralization has also spoiled the industries’ development plan. 24 steel projects have been developed, though they are not listed in the steel industry development strategy.

FDI projects cannot develop domestic industries

While many people criticize Vietnam’s policies for giving more incentives to foreign investors than to Vietnamese, FDI still cannot help develop domestic industries

The auto industry, for example, demonstrates that the existence of foreign-invested car manufacturers has not helped develop Vietnam’s auto industry.

Former Minister of Trade Truong Dinh Tuyen also noted that FDI projects have mostly gone to assembly industries using the cheap labour force of Vietnam.

Labourers for foreign invested enterprises – the hot issue

An investment promotion conference held in Ha Tinh province in September 2009 discussed only one issue: the labour force for FDI projects.

While more and more FDI projects are carried out, the number of workers and quality of the labour force has not been improved accordingly.

Ha Tinh, for example, needs 20,000 workers every year for projects and will require 119,000 labourers by 2015. Yet in the 2001-2008 period, Ha Tinh trained only 26,000 workers.

Foreign investment agency tasked with FDI programming

The Ministry of Planning and Investment decided in April to stipulate the functions, tasks and organization of the Foreign Investment Agency.

One of the most important tasks of the agency is to draft strategy and set up programmes and lists of projects calling for FDI.

Re-orienting FDI attraction

Vietnam announced its policy on FDI attraction in 2009. The country encourages investment in high-technology fields, supporting industries, farm produce processing and services which can bring high added value.

Vietnam will also prioritise investment in rural and remote areas.

FDI in education encouraged

The draft decree on cooperation with foreign partners in education encourages investment in training information technology, telecommunication, e-commerce, precise mechanical, environment protection, agriculture, tourism and power

In order to set up nursery education, investors must provide $1,000 per child, while the rate is $2,500 per student for general school, and total investment capital is $2.5 million at minimum.

As for university education, the minimum investment rate is $7,500 per student and minimum investment capital of $15 million.

Vietnam speeding up infrastructure investment

Poor infrastructure is always the biggest obstacle to attracting FDI.

PPP (public private partnership) is believed the solution to the problem. The Ministry of Planning and Investment said that the model would be used on a trial basis in some projects funded by the World Bank

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