14:43 | 14/07/2015 Investment
(VEN) - Vietnam should pay attention to the quality of foreign direct investment (FDI), Central Institute for Economic Management Director Dr. Nguyen Dinh Cung told Vietnam Economic News’ reporter Nguyen Hoa, when discussing the country’s FDI attraction results in the first five months of this year.
Both new and supplementary FDI capital in the first five months of this year accounted for only 78 percent of that in the same period last year. What are the reasons for the decline?
Reasons for reduced FDI capital vary. I think there are three major reasons. Firstly, Vietnam was previously known as having advantages in terms of a strong work force and low labor costs. However, this advantage doesn’t necessarily exist now.
Secondly, after easy adoption of investment projects, local authorities have now started to pay attention to choosing good projects to prevent unworkable, labor-intensive, land-intensive and environmentally-polluting projects.
Thirdly, the Vietnamese investment environment has not really attracted quality, high-added-value FDI projects due to undeveloped support industries which have discouraged foreign investors from upgrading their facilities in Vietnam.
More than 70 percent of FDI registered capital in Vietnam is in processing and manufacturing. Many said that with this momentum, Vietnam will become the world’s assembly factory. What do you think about it?
I don’t think that most FDI in processing is bad. I’m not worried that Vietnam will become the world’s assembly factory, because once this comes true, the processing, manufacturing and support industries will grow and there will be more high-skilled workers, while the added value will increase.
However, in order not to adversely affect the environment, localities should carefully choose projects with a focus on new-technology and environmentally-friendly projects.
Vietnamese support industries remain weak. What do you think Vietnam should do to develop them?
Support industries have not developed, not because we lack the ability. It’s just because we lack a transparent mechanism and haven’t created favorable conditions for businesses to invest.
To develop support industries in the near future, the state needs to apply stable development policies and transparent, open and favorable mechanisms towards businesses. Specifically, it is necessary to connect medium to small-sized enterprises in support industries with foreign giants that are investing in Vietnam in order for them to understand each other and in order to support them in a timely manner.
What is the direction for FDI attraction in the coming time?
I think in terms of attracting FDI in the short run, we should pay attention to the quality, rather than quantity. If we attract FDI at any cost, there would be too many FDI projects which would affect domestic investment. Reduced FDI is also a way for us to pay more attention to the domestic private sector and carry out proper reforms to help this sector develop.
According to the Ministry of Planning and Investment, Vietnam attracted US$4.29 billion in FDI in the first five months of this year, accounting for 78 percent of that a year ago. Of this, the processing and manufacturing sector attracted US$3.15 billion accounting for 73.4 percent of total registered FDI capital.