Looking back on 30 years of FDI attraction: benefits and losses

	Conference to review 30 years of FDI attraction in Vietnam
	Legal framework completion helps Vietnam successful in FDI attraction
	New direction needed to eliminate "dark areas" in FDI attraction

Honda is one of the successful FDI enterprises in Vietnam.

Great changes thanks to FDI

After 30 years, it can be said that FDI has directly changed the socio-economic situation of many localities. In the north, there are many typical localities that have attracted FDI, such as Hanoi, Vinh Phuc, Bac Ninh and Thai Nguyen.

Regarding Vinh Phuc, from the starting point with many difficulties and shortcomings, so far Vinh Phuc has grown and become one of the leading provinces for investment attraction. In 1998, Vinh Phuc had only 8 FDI projects, so far it has over 250 FDI projects by 16 countries with a total investment of nearly US$ 4 billion.

In the past, Vinh Phuc’s budgetary revenue was only 114 billion VND in 1997 and dependent on the central budget, thanks to FDI attraction and economic restructuring, now Vinh Phuc’s revenue has exceeded the VND 30,000 billion per year mark. This result is due to attracting two investors, Toyota and Honda of Japan, which have made great contributions to Vinh Phuc province.

At a seminar on the FDI attraction held in Vinh Phuc, sharing about solutions to successfully attract this capital, Le Duy Thanh, Vice Chairman of Vinh Phuc People's Committee said that the province has invested in upgrading essential infrastructure, strengthened administrative reform and improved the quality of human resources to facilitate FDI enterprises’ investment and development.

Prof. Nguyen Mai, former Deputy Minister of Planning and Investment said that Vinh Phuc’s budgetary revenue in 2012 was around VND 2,000 billion, but in 2017 this revenue was raised to VND 22,000 billion. "We have provided 100 hectares of land for Samsung, if we used this area for agricultural production, we would collect VND 300 million per hectare, while Samsung pays VND 3,000 billion per year, equivalent to an average of VND 30 billion per hectare," analysed Nguyen Mai.

According to the data from the Foreign Investment Agency, FDI is now available in all 63 provinces and cities over the country, of which Ho Chi Minh City is the leader in FDI attraction with US$ 44.4 billion, followed by Hanoi with nearly US$ 32.8 billion and Binh Duong with US$ 30.8 billion. Except Ho Chi Minh City and Hanoi, the two leading economic locomotives of the country, many other localities have changed thanks to FDI. In the south, in the 1990s, Binh Duong was still a poor province and mainly depended on agricultural economics while industry and services were not developed. To date, Binh Duong has attracted more than 3,300 FDI projects with a total investment of nearly US $ 39 billion, mainly focusing on industry, which accounts for a major proportion of annual development investment of this province. As a result, Binh Duong has become one of the most dynamically developing localities in the country.

US$ 334 billion - a miracle

30 years of renovation is also 30 years that Vietnam has carried out many preferential policies to attract FDI. The achievements are extremely significant.

According to data from the Foreign Investment Agency (under the Ministry of Planning and Investment), from 1988, the first year of implementation of the Foreign Investment Law to this date, Vietnam has more than 26,000 FDI projects by investors from 129 countries and territories. According to the big companies such as Samsung, Intel, Toyota, Honda, Microsoft and etc., and many other FDI projects, the investment capital flow has reached over US$ 334 billion, of which US$ 183.62 billion has been invested in the economy, equal to 55% of the total valid registered capital. This tremendous source is a miracle, which has brought changes, accelerated economic growth and economic restructuring towards modernization, risen investment capital in the economy, and improved technology qualification and the quality of human resources for Vietnam. Currently Vietnam is a developing country for exports with a turnover of more than US$ 400 billion, in which the FDI sector contributes up to 70%.

Looking back on the early days when Vietnam started attracting FDI, Nguyen Mai, Deputy Director of the State Committee for Cooperation and Investment (SCCI), said that since the beginning of 1988, after the Law on Foreign Investment was promulgated, the Government assigned the Ministry of Foreign Affairs the task of evaluating and licensing FDI projects. In March 1989, the SCCI was established to take charge of state management on foreign investment. Confirming the importance of FDI in economic development since then, especially in industry, Prof. Nguyen Mai said that thanks to FDI, one of the sectors that Vietnam is no worse than any other countries in the ASEAN is information technology. Nguyen Mai noted that in 1991, Vietnam Post and Telecommunications Corporation (VNPT) and an Australian Post signed a business agreement with an Australian Post and Telecommunications Corporation with a total investment capital of about US$ 10 million, which laid the foundation for Vietnam’s development of information technology. Soon after, Australia has brought the most modern telecom technologies into Vietnam, trained new leaders who could access the modern technology and changed the administration method of VNPT towards the market economy. "We now turn to 4G and now start 5G to catch up with Singapore and have surpassed a lot of countries. At present, the number of Vietnamese using smartphones is over 50 million, and the computer users accounts for 70%, the internet is very common in Vietnam. As far as telecommunications technology is concerned, from being the most backward country with the most expensive prices, Vietnam now becomes Southeast Asia's leading provider of information technology and telecommunication services at the cheapest price," said Prof. Nguyen Mai.

Currently, the manufacturing and processing industry is the leading sector attracting FDI into Vietnam with an investment capital of up to US$ 190 billion, accounting for nearly 60% of FDI, producing 50% of industrial value. Vietnam has become Samsung's largest production establishment of mobile phones and the destination of big groups in electronics, petroleum, textiles and garments, real estate and electricity, which contribute to forming some key industries of the economy in these areas.

Change the FDI attraction strategy

Looking back on the past 30 years, in addition to great contributions to the socio-economic development, FDI attraction still leaves traces of sadness, when the question on benefits and losses in FDI attraction is still raised and especially when shortcomings on FDI attraction have not been really improved.

In this regard, Minister of Planning and Investment Nguyen Chi Dung said that besides the positive results and great contributions, FDI attraction has also revealed shortcomings that should be removed soon. They are: the link between the FDI sector and domestic enterprises is still loose, the localization is still at a low rate, especially for the automotive industry and electronics; the number of high-tech projects invested by transnational corporations is not significant, of which some projects cause environmental pollution, including serious environmental incidents such as the case of Formosa Ha Tinh, Vedan Dong Nai; the use of resources, especially land is still wasteful, and transfer pricing has happened in some projects, causing tax losses.

According to Sebastian Eckardt, the World Bank's Lead Economist for Vietnam, in order to meet the country's development objective in the coming period, there must be policies, strategies together with an action plan associated with specific reform of investment environment, policies and institutions to attract new- generation FDI, and to maximize the potentials that FDI brings to Vietnam. Accordingly, he has made recommendations for Vietnam in FDI attraction, including some noteworthy recommendations such as establishing a new generation FDI management agency; issuing specific policies to enhance connectivity and spillover effect from FDI; building an "Investment Environment 4.0" that complies with the needs of enterprises in the digital era. In particular, it needs to further reform the existing incentive framework and to rebalance incentives based on investment efficiency.

Minister of Planning and Investment Nguyen Chi Dung said that it is time for us to improve our institutions and our competitiveness in order to select and attract high quality FDI projects in line with our socio-economic development strategy for the country, as well as the changes of science and technology in the 4.0 revolution and the trend of international capital inflows.

Conference on 30 years of FDI attraction to open new era and vision The national conference on 30 years of FDI attraction in Vietnam will take place on Thursday, October ...

Accordingly, in the coming time, it needs to prioritize the attraction of high-technology projects of transnational corporations in the fields of manufacturing industry, high-efficiency agriculture, information technology and other potential and competitive fields. They must be environmentally friendly, resource-saving, energy-saving and low-carbon projects, and in line with the country's socio-economic development strategy. We will also give priority to the attraction of projects that have spillover and link to the domestic sector.