Links to increase impact of FDI

14:00 | 15/05/2014 Economy

(VEN) - The foreign direct investment (FDI) sector has made major contributions to socioeconomic development in Vietnam. However, the sector has not had significant impact. For this reason, increasing its impact via strengthening links with domestic businesses is necessary in order to increase efficiency of FDI flows.

It is necessary to increase the impact of the FDI sector

Statistics from the Foreign Investment Department showed that Vietnam attracted 16,323 FDI projects with total registered capital of US$237.633 billion by the end of this April. The projects come from 101 countries and territories and include investment in 18 sectors in all 63 centrally-controlled provinces and cities.

Minister of Planning and Investment Bui Quang Vinh said that FDI is a major source of capital which has contributed to economic growth in Vietnam and increased efficiency of domestic resources. FDI capital has also importantly contributed to creating jobs, increasing productivity and improving the quality of human resources. The FDI has provided more than two million direct jobs and about four million indirect jobs in Vietnam.

Apart from major achievements, Bui Quang Vinh said that the FDI had exposed weaknesses. Most FDI capital went to sectors which were labor-intensive, used natural resources and made the most of state protection policies. FDI also focused on localities with favorable infrastructure and human resources. A number of FDI projects imported used machinery and equipment, plus technology and equipment which were over-evaluated and showed signs of price transferring. The FDI sector recorded high revenues both in terms of export and import.

National Economic University Deputy Director Professor Dr. Tran Tho Dat said at a workshop during March that weak linkages between FDI and domestic businesses were a major reason for the low impact of the FDI sector on Vietnamese economic growth in recent years. To increase its impact, there is no choice but to strengthen links between FDI and domestic businesses to improve the role of the FDI sector and provide internal strength for rapid and sustainable economic growth.

However, Professor Kenichi Ohno from the National Graduate Institute For Policy Studies (GRIPS) said that to strengthen such links, Vietnam needed to apply a strategy to attract FDI, build capacity of local businesses and link FDI and local businesses. The country also needs to change its FDI attraction strategy from quantity to quality focusing on giant groups and companies which are ready to transfer their technology to meet Vietnam’s need.

In terms of building capacity among local businesses, Ohno recommended that the Vietnamese government put in place policies to help domestic businesses increase their competitiveness, join the global supply chain and become reliable production partners for the FDI sector. Vietnam also needs to strengthen links between FDI and domestic businesses to boost relations between these sectors. In doing so, the government would help the FDI sector increase its impact on the Vietnamese economy./.

By Nguyen Hoa