Facilitating FDI in the Mekong Delta

11:25 | 05/06/2014 Economy

(VEN) - Construction of appropriate investment promotion policies and trade exchange stimulation are something that business associations and foreign direct investment (FDI) enterprises suggested at the Mekong Delta investment environment conference recently held in Ho Chi Minh City to facilitate FDI in the Mekong Delta.

The processing industry has attracted many investors to the Mekong Delta

According to Vietnam Chamber of Commerce and Industry in Can Tho City Director Vo Hung Dung, the Mekong Delta accounted for over 40 percent of Vietnam’s agricultural farm produce and seafood output, almost one fifth of the country’s total goods consumption and retail sales and 10 percent of all businesses throughout the country. About 10.5 million people in the region were of working age. Labor costs in the Mekong Delta also remained low. The Mekong Delta was a dynamic area that had many major exporting businesses. Delta businesses exported about six million tonnes of rice (accounting for 90 percent of the country’s total) and seafood worth US$4.1 billion (accounting for 60 percent of the country’s total) in 2013.

The business environment in the Mekong Delta improved considerably. In 2013, five of the 10 biggest provinces and cities in terms of leadership dynamism index came from the Mekong Delta.

The government has allowed an increase in investment capital for the Quan Chanh Bo channel project in order to make it possible for big ships to enter the Mekong Delta. The Dinh An Economic Zone (Tra Vinh Province) and Tran De Economic Zone (Soc Trang Province) have been planned and invested. Roads linking the Mekong Delta with provinces were being upgraded to cater for economic development and investment attraction.

Although the Mekong Delta had many advantages and the potential it was facing difficulties in attracting FDI. The Mekong Delta attracted only 839 FDI projects (accounting for 5.2 percent of the country’s total) totaling US$11.8 billion in registered capital (accounting for 4.9 percent of the country’s total) in 1988-2013. Of these, 493 projects worth almost US$3.8 billion were found in Long An Province, located near Ho Chi Minh City, and 35 projects worth more than US$3.1 billion were found in Kien Giang Province.

There are many reasons why FDI in this region remained humble. Some of these were the substandard workforce, the lack of outstanding investment promotion policies and the absence of a strategy to attract investment based on existing advantages.

American Chamber of Commerce in Vietnam (AmCham Vietnam) Executive Director Herb Cochran said that several large companies that AmCham recommended have had effective investment projects in the Mekong Delta, including Cargill and DuPont (agriculture), SPBV (a merger between PepsiCo Vietnam and Suntory) investing in food and beverage, and GE Vietnam (industry).

Herb Cochran said that the Mekong Delta should learn about investor demands if it is to attract more FDI and investors are interested in localities where leaders take practical, effective actions and easy land access, flexible credit systems, simple administrative procedures and tax exemptions and reductions are available. The Mekong Delta should rapidly develop a specific strategy with concrete targets and be determined to reach those targets. Actually, the connectivity between the 13 provinces in the Mekong Delta remained modest, with each of the provinces having their own investment promotion policy. Their investment promotion policies were inconsistent and changing.

Japan External Trade Organization (JETRO) in Ho Chi Minh City Executive Director Yasuzumi Hirotaka said that apart from capital inflows into production, investment in such services sector as retail and distribution developed strongly. The processing industry is a promising area for investment. This field can take maximum advantage of the local’s agricultural and aquatic resources including rice, fruit, shrimp and fish, among others.

However, according to Yasuzumi Hirotaka, the Mekong Delta was facing major challenges, as farm produce and seafood production and harvesting in the region in general remained outdated; laws remained overlapping, while administrative procedures remained complicated and high-grade labor shortages still existed in almost all sectors./.

                         Ngoc Thao

 

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