Screening tools to enhance FDI quality

According to VCCI, FDI is one of the major resources for socioeconomic development. However, certain problems have arisen with FDI projects.

For example, some FDI companies were involved in transfer pricing and tax evasion, or did not abide seriously by environmental regulations, with detrimental social consequences. Local governments had to revoke some investment certificates due to delayed implementation of projects, while some foreign-invested projects still operate at a loss.

Some companies have failed to adhere to environmental laws and regulations. Inspections conducted by the Vietnam Environment Administration in 28 northern provinces from 2017 to 2019 show an increased percentage of FDI companies violating environmental regulations, from 44.5 percent in 2017 to 56 percent in 2018 and 68 percent in 2019.

Moreover, according to a VCCI study, only five percent of FDI projects use high technology, 80 percent use medium technology, and 14 percent use low technology. The local content of products ranges from 20-25 percent, lower compared with other countries in the region.

How to attract quality FDI projects, or to find responsible investors? How to minimize socioeconomic and environmental impacts of low-quality foreign investment projects? These questions are of great concern.

One of the solutions, according to Ramla Khalidi, UNDP Resident Representative in Vietnam, is using a set of screening tools to select responsible investment projects and to ensure their benefits for the Vietnamese people, environment and economy, helping promote Vietnam’s sustainable development.

According to Dau Anh Tuan, Head of VCCI’s Legislation Department, the tools include compulsory assessments by local governments to exclude FDI projects not abiding by Vietnamese laws and causing risks to the socioeconomic life and the environment, while encouraging abidance by international standards and good, responsible business practices.

The screening tools are expected to help improve the quality and effectiveness of FDI in Vietnam, increasing their contributions to Vietnam’s socioeconomic development