Lifting barriers to attract foreign investors

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Ho Chi Minh City is an attractive destination for FDI investors. Photo provided by the enterprise

Positive signals

Due to the global economic chaos, global businesses are more cautious in their investment decisions. However, many investors still believe and make decisions to expand or invest in new projects in Vietnam in general and Ho Chi Minh City in particular. As a result, in the first 6 months of 2023, FDI "poured" into Ho Chi Minh City reached 2.8 billion USD, up 30.7% over the same period. FDI capital into Ho Chi Minh City "boomed" in the first 6 months of the year showing the vitality of Ho Chi Minh City's economy in the second quarter after falling deeply in the first quarter of 2023, which is a good sign in the context of increasing competition in attracting FDI among countries.

Deputy Director of Ho Chi Minh City Department of Planning and Investment Dao Minh Chanh said that Vietnam is a destination for investors in the world, a bright spot to attract investment in the region in recent years, of which Ho Chi Minh City ranked first in the search list. Up to now, Ho Chi Minh City has 11,868 valid foreign investment projects, with a total investment capital of both new and increased capital of more than 81.29 billion USD, leading in the number of domestic valid projects.

To promote FDI attraction in the coming time, Ho Chi Minh City is implementing a project to improve the efficiency of attracting foreign direct capital in the area for the period of 2023 - 2025, with a vision of 2030. Accordingly, in the short and medium term, Ho Chi Minh City prioritizes attracting digital economy and technology 4.0-based industries, microelectronics, semiconductors, and information technology. Moreover, outdated technology, energy consumption, and environmentally threatening ones are all eliminated. At the same time, the city also applies selective foreign investment criteria

However, according to experts, currently, there exist some barriers such as unfavorable administrative procedures, and inadequate state management of FDI. Moreover, incentives to attract FDI are not attractive enough, infrastructure is not synchronized, and legal regulations are overlapping. In addition, traffic jams, flooding, high tides, pollution... make investors hesitate. The number of enterprises participating in the supply chain is not much (service industry, equipment, indirect materials); domestic production value is not high; research and development (R&D) activities have not been implemented, no R&D team has been established in the factory...

Remove “barriers” to regain the advantage

Acknowledging the "barriers" in attracting FDI to Ho Chi Minh City, many businesses said that despite the recent improvement in the investment environment, there are many shortcomings in terms of procedures as well as the regulatory framework which hinder the investment intentions in spite of the Government's preferential policies

Sharing with reporters on the sidelines of the conference "Strengthening investment attraction and proposing effective legal solutions for investors in Ho Chi Minh City" that took place recently, Mr. Vu Tu Thanh, Deputy Director of ASEAN Region, Association The US-ASEAN Business Council said that US investors in Vietnam in general and Ho Chi Minh City, in particular, have to face many legal risks. The first is how to understand and interpret legal documents. In fact, many investors decided to make an investment decision based on the consultation and explanations of a central ministry or branch, but due to unpredictable changes, the interests of the investor are not guaranteed. The second risk is regulations on land access, tax regulations, and even regulations on dispute settlement between enterprises and between enterprises and management agencies.

Mr. Dau Anh Tuan, Deputy General Secretary, Head of the Legal Department of the Vietnam Confederation of Commerce and Industry (VCCI), said that the biggest advantage in attracting investment in Vietnam and Ho Chi Minh City was the low cost, including tax incentives. However, now, these factors have changed and this advantage no longer existed. In addition, the legal framework regulating business investment activities reveals many shortcomings, making the Government's preferential policies, which are very attractive, still difficult to attract potential capital sources.

Ms. Cao Thi Phi Van, Deputy Director of the Investment and Trade Promotion Center of Ho Chi Minh City (ITPC), said that if tax incentives are not taken into account, the remaining problem in attracting FDI in Ho Chi Minh City is to focus on improving improve the investment environment. Therefore, Ho Chi Minh City needs to have a strategic and long-term policy so that traditional investors can feel secure to expand their scale, and at the same time create attraction for new investors. And one of the key goals that need attention in the coming time is to propose effective legal solutions for investors in the City, in order to create a healthy and clean legal environment so that foreign investors can be assured of stable investment and long-term business.

Vu Tien Loc, Chairman of the Vietnam International Arbitration Center (VIAC), suggested that Ho Chi Minh City should focus on a number of key points such as institutions, infrastructure, and human resources. In particular, it is of urgent need to identify and implement appropriate legal solutions, and timely improve policy issues in attracting investment and operating FDI projects.