World Bank lists priorities for FDI attraction

IFC experts believe economic reforms over the past three decades, including efforts to attract FDI, have been a major driving force of Vietnam’s economic growth and international integration. Except for a short interruption due to the adverse impact of the Asian financial crisis from 2007-2009, FDI flows to Vietnam increased on an annual basis and grew rapidly in the 2014-2017 period, with the registered amount growing from US$21.9 billion in 2014 to US$31.1 billion in 2017. The implemented amount also increased from US$12.5 billion in 2014 to US$17.5 billion in 2017. By the end of June 2018, registered FDI in Vietnam had reached US$331.2 billion, and US$180.7 billion had been disbursed.

Nguyen Noi, Deputy Director of the Ministry of Planning and Investment’s Foreign Investment Agency, said FDI had helped Vietnam integrate into the global economy, participate in regional production chains, diversify export products, generate more jobs, increase revenue for the state budget and improve the balance of national payments. However, the number of FDI projects using high technologies, especially source technologies, remains limited. FDI projects are concentrated in the exploitation of natural resources, the real estate market, and labor and energy-intensive sectors where many work stages are outsourced by foreign firms.

IFC experts believe it is time for Vietnam to change its FDI attraction policy in accordance with the country’s socioeconomic development strategy for the 2011-2020 period. In their opinion, the Fourth Industrial Revolution requires Vietnam to build a next-generation FDI attraction strategy.

Wim Douw, IFC’s senior private sector specialist, recommended eight priority areas on which Vietnam should focus to create breakthroughs in FDI attraction. In order to improve technical skills for domestic workers to meet the requirements of foreign investors, the state needs to take various measures, beginning with comprehensive surveys of the labor supply in each sector to provide input for human resource training programs.

At the same time, Vietnam should establish specialized agencies to separate state management from investment promotion activities. Furthermore, the IFC is urging Vietnam to modernize investment promotion activities; create a favorable investment and business environment for businesses to take advantage of Industry 4.0; put in place suitable policies to promote overseas direct investment; and open major sectors to attract FDI.