Adaptive, fundamental, and synchronous solutions to improve the effectiveness of attracting FDI

VCN - Mr. Le Huu Quang Huy, Member of the Inter-Branch Executive Committee of Vietnam Industrial Park Finance Association (VIPF), Vice Chairman of the Board of Members of the International Investment Study Institute (ISC) had an interview with Customs Magazine reporters about the FDI attraction situation.
Opening the door to attracting high-quality FDI from Europe and America Opening the door to attracting high-quality FDI from Europe and America
VN looks to remain a strong competitor for global FDI VN looks to remain a strong competitor for global FDI
Adaptive, fundamental, and synchronous solutions to improve the effectiveness of attracting FDI
Mr. Le Huu Quang Huy, Member of the Interim Executive Committee of the Vietnam Industrial Park Finance Association (VIPF), Vice Chairman of the Board of Members of the International Investment Research Institute (ISC).

How do you evaluate the recent FDI inflows into Vietnam, especially the results of FDI attraction in the first 2 months of 2024?

According to data from the Foreign Investment Bureau (Ministry of Planning and Investment), accumulated to now, Vietnam has attracted 39,553 FDI projects with a total registered capital of US$ 473.1 billion, the total implemented capital of the FDI projects has reached nearly US$ 300 billion, equal to 63.4% of total registered capital. In the first 2 months of 2024, Vietnam attracted US$ 4.29 billion of FDI capital, an increase of 38.6% over the same period in 2023. Notably, disbursed FDI capital also recorded reaching US$ 2.8 billion in the first 2 months of 2024, an increase of 9.8% over the same period in 2023.

The above numbers show that, although global FDI attraction has not been stable in recent times, FDI inflows into Vietnam are still stable and tend to increase. This proves that Vietnam is still considered an investment destination for both the region and the world.

FDI investment in Vietnam also appears a new trend, FDI capital flows focus on green and clean technology fields and fields with high technology content such as chip and semiconductor production. These are positive points. However, the above signs also pose new requirements for Vietnamese human resources issues in the field of high technology and semiconductor industry; the problem of supplying raw materials at competitive prices for FDI enterprises..., which requires adaptive solutions to absorb high-quality investment capital flows from foreign corporations.

Reality shows that in recent times, most foreign investment projects have focused only on provinces and cities with developed socio-economic infrastructure conditions. What do you think about this situation?

This is very normal, because the nature of FDI projects are businesses from different nationalities. If the investment does not bring profits and the ineffective cooperation, they will not enter or go elsewhere. For localities with underdeveloped socio-economic infrastructure, they will have to spend time, construction costs, human resource training, and raw material transportation costs. Meanwhile, localities with developed socio-economic infrastructure are easier to attract FDI because investors do not have to spend time and money on the above issues.

Thus, to attract FDI investment, it is necessary to improve the investment environment at the national or local level, including improving the "hard" investment environment (roads, bridges, electricity and water supply, internet, advanced medical facilities...) and "soft" investment environment (incentives, administrative procedures, government investor support, laws, policies, labour supply through training...). To do so, adaptive, radical and synchronous solutions are needed. In particular, localities also need to have a more effective approach in investment promotion. In particular, to attract FDI effectively, in my opinion, there should be no provincial or city borders. for example, an investor needs 30 hectares of land in one location, but wants to take 20 hectares of land from this locality and 10 hectares from another locality, at that time, there is a need for linkages among provinces and cities to harmonize interests and attract investment projects. So, what I want to mention here is that coordination between ministries, branches and localities in attracting FDI is also extremely important.

In my opinion, it is not necessary to have FDI capital flows spread evenly in all localities, but depending on its advantages, each locality needs to have an appropriate economic development direction. For example, localities with agricultural advantages can focus on developing export agricultural product processing industries to match their advantages, rather than pursuing the goal of chip production. Thus, the important issue is that we need to change our thinking. The ultimate goal is still to be people-centered, to change people's lives for the better.

Vietnam will begin implementing the Global Minimum Tax Resolution from 2024, tax incentives will no longer be an attractive tool in attracting foreign investors. So, in your opinion, which issues do we need to pay attention to in new investment incentive policies to attract FDI investment?

To promote FDI attraction, it is necessary to soon have new investment support policies, replacing (not compensating for tax shortfalls) for previous incentives. That is a realistic requirement to attract large investors, strategic investors, "eagles" to continue flying into Vietnam to "nest", cooperate, invest... However, it is necessary to view objectively, the application of global minimum tax regulations also brings new opportunities to Vietnam. For example, increasing budget revenue from additional tax revenue, enhancing international integration, minimizing tax evasion and tax avoidance, illegal profit and price transform... On the other hand, it is necessary to maintain the current incentive policies applying to businesses that are not subject to the global minimum tax.

Sir, accounting for more than 60% of total FDI capital invested in Vietnam, the processing and manufacturing industry is still the leading field attracting foreign capital. How do you comment on this number?

Processing and manufacturing industry is the strengths of many businesses globally, and whatever is their strength, they will focus on investing to seek profits, it is reason that the processing and manufacturing sector always has a high proportion in Vietnam's FDI activities. In addition, to realize the goal of industrialization, Vietnam has recently had many policies to encourage investment projects in safe production fields that do not affect the environment, this also creates certain opportunities for FDI businesses to invest in the processing and manufacturing industry in Vietnam.

In terms of benefits, FDI capital flows focusing heavily on the processing and manufacturing industry will contribute to promoting the development of the domestic industry and furthermore, the development of Vietnam's economy, and participating in the process of training high-quality labour resources in the processing and manufacturing industry in Vietnam. However, in terms of the economy's GDP distribution structure, Vietnam's 2022 data shows that the import-export and service sectors only reached 41.33%. For most developed countries, this rate is over 50%. For the group of industrialized countries (G7), such as the US, Japan, and Western Europe, this rate accounts for 70-80% of their GDP. Therefore, in the future, attracting and cooperating FDI needs special attention to increase the service ratio higher. Because this area brings large income and contributes increasingly to the country's economic development.

Thank Sir!

By Thu Hien/ Binh Minh

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