Domestic integration necessary with FDI projects

(ĐTTCO) - Mr. Do Nhat Hoang (photo), Director of Foreign Investment Department in the Ministry of Planning and Investment, spoke with Saigon Investment recently expressing that the amended Public Investment Law that has just been passed by the National Assembly is expected to create opportunities to attract Foreign Direct Investment (FDI) of high quality for large technological projects with wide management capacity, thus creating a growth stimulus for several domestic enterprises.
Golden opportunity when FDI flows, but we must know how to select it.
Golden opportunity when FDI flows, but we must know how to select it.

JOURNALIST: - Sir, will this wave of FDI investment be a golden opportunity for Vietnam?

Mr. DO NHAT HOANG: - In the last two years we have had such golden opportunities at least three times to attract very large scale FDI into Vietnam.

The first time was when Vietnam participated in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). At that time, many foreign investors came to Vietnam, some even from China. They come to invest in Vietnam with the intention of taking advantage of the CPTPP format when it came into force so as to fully utilize the preferential tariffs it offered.

The second time was when the US-China trade war broke out which affected international investors in both furthering their investments as well as the export markets, forcing most big investors to restructure their capital. Restructuring means transfering investment capital to the US market or other investment markets. When restructuring towards the United States, they also turned investments towards the Vietnamese market.

The third time we saw a wave of FDI movement was soon after the outbreak of the Covid-19 pandemic that suddenly paralyzed the global economy and investors felt vulnerable by being dependent on a market such as China where the virus actually erupted and thereby disrupting the global markets. At that time investors were compelled to restructure in order to diversify their supply chain and export markets. This time investors were surprised the most because the global supply chain was disrupted far too quickly.

- How do you assess the attraction to the Vietnamese market compared to other markets for foreign investors ?

- Foreign investors, after shifting their investment capital from the Chinese market, target specific addresses. In Asia, they tend to move towards India, Indonesia and Vietnam, while in Europe the move is towards Eastern European countries, and in the Americas it is towards Mexico. The question here is how can  our economy absorb FDI inflow. In addition, we need to pay attention to what investors ask when they come to our market to seek investment opportunities.

Firstly, when shifting investment capital, production workshops and appropriately suitable premises for rent as factories are an essential requirement. The land used for factory premises must follow investor guidelines and not our current fragmented or speculative planning methods. Through promoting investment projects over the years, we have gained a lot of experience in this. For example, many foreign investors are willing to pour capital into Bac Ninh, Bac Giang, Dong Nai and Binh Duong provinces now, even though other provinces have land available. The current problem that needs to be overcome is that the industrial land price is rising too high, which is making investors hesitate in putting up projects.

Secondly, Resolution 50 of the Politburo mentions that local workers must be trained by businesses, but such training takes time. We are now interested in the overseas export workforce who have returned home. According to the Ministry of Labor, War Invalids and Social Affairs, each year about 40,000 workers from abroad return back to Vietnam. We need to create a specific plan to connect with them, especially those who have worked in Japan, South Korea and Europe, and who are both skilled and familiar with the industrial labor culture. From there on, classification into regions and industries can be made for local labor sources to meet the needs of foreign businesses.

Thirdly, regarding the issue of framework and legal corridors for foreign investors, currently, two important laws passed by the National Assembly, the amended Enterprise Law and the amended Investment Law, can be a basis for foreign investors to invest in Vietnam and create opportunities for Vietnam to attract high quality investment capital flow.

- Sir, what do we need to pay attention to so as to improve our selection of best quality FDI capital?

- Let’s take the example of constructing industrial zones for foreign investors to rent and set up their project. Now, even if we have the land and factory, it does not mean that the foreign investors will rent these premises. The general trend is that we must have intelligent industrial parks in accordance with modern ecosystems. Here, ecosystem is a combination of housing with services attached to meet the cultural requirements of the investors.

Vietnam's ability to integrate FDI capital smoothly has not been very successful in the past, especially high quality large capital flow with advanced technology. We have recognized this as a limitation but unfortunately so far we have not overcome it. The Politburo has issued Resolution 50, in which the focus is to attract selective investments only. Following this orientation, it is hoped we can attract more capital flow with quality projects. FDI inflow in projects must have high technology content, create a spillover and become a driving force to pull in domestic enterprises to develop with it.

The National Assembly has just passed an amended Investment Law, which includes provisions accompanied with tax incentives for FDI enterprises, with the criterion that when FDI enterprises invest, they must make commitments with domestic Vietnamese enterprises to join in the production chain. This commitment will link domestic production as well as improve on domestic human resource training.

- Thank you very much.

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