Legal framework completion helps Vietnam successful in FDI attraction

Illustrative Image (Source: VNA)

In December 1987, the Law on Foreign Investment in Vietnam was first promulgated. Through three revisions, in 2005, the law and the Law on Domestic Investment were replaced by the Law on Investment.

The revision and issuance of the Law on Investment in 2014 created a breakthrough in Vietnam’s mindset on FDI attraction, with a new regulation allowing businesses and investors to do business in areas that are not banned by the law.

The completion of the legal framework proved that the investment attraction policies of Vietnam have been flexible to suit the specific development periods of the country.

In 1991, a huge wave of foreign investment came to Vietnam. In only seven years, Vietnam lured 2,230 FDI projects with a combined registered capital of over US$3.11 billion, 9.5 times higher than that in 1991.

According to the Foreign Investment Agency under the Ministry of Planning and Investment, after 30 years of calling for FDI, the 63 provinces and cities across the country have so far hosted 26,438 FDI projects from 129 countries and territories with a total investment of US$333.38 billion, of which US$183.62 billion or 55% of total valid capital have been disbursed.

Minister of Planning and Investment Nguyen Chi Dung said that the FDI sector has played an increasingly important role in the economy.

Currently, 58% of the FDI is focused on the processing and manufacturing sector, making up 50% of the country’s industrial production, and contributing to forming some key industries of the economy such as oil and gas, electronics and telecommunications.

Along with injecting capital to the economy, FDI firms have also transferred management skills to their Vietnamese peers and helped renovate domestic firms’ technology.

Particularly, the FDI sector also creates impact on some areas of the economy through its advanced technology and international standards in business management as well as workforce skill improvement and job creation.

So far, FDI enterprises have created jobs for over 3.6 million direct and 5-6 million indirect labourers.

In localities with the largest number of FDI projects such as Hanoi, Bac Ninh, Thai Nguyen, Vinh Phuc, Hai Phong, Ho Chi Minh City, Binh Duong and Dong Nai, contributions of the FDI sector is much higher, helping transform the economic structure of the localities and create favourable conditions for domestic firms to develop their business.

During his recent visit to Vietnam, Kuniharu Nakamura, Co-Chair of the Japan-Vietnam Economic Committee of the Japan Federation of Economic Organisations (Keidanren), said that Vietnam is an attractive destination for Japanese investors thanks to the country’s large population and its location as a gateway to the ASEAN, along with stable socio-political conditions. The number of Japanese firms wishing to invest in Vietnam has increased, he added.

However, in order to promote advantages and minimise problems from the FDI, Minister Dung held that it is time for Vietnam to complete the institutions and enhance competitiveness to select and lure higher quality projects to suit the country’s socio-economic development strategy as well as changes in science and technology amidst the fourth industrial revolution and the international capital movement trend.

Besides, it is necessary to define areas, sectors and partners with priority in FDI attraction, he added.