Will the uptrend of FDI flow to Vietnam change next year, Professor?
This upturn has just begun and 2015 is the start point of the third wave of foreign direct investment (FDI).
Many transnational companies such as Microsoft and Samsung have been moving their production facilities to Vietnam from China, the country’s largest FDI competitor.
Meanwhile, companies from mainland China are racing with those from Hong Kong and Taiwan to set up textile plants in Vietnam, to capitalize on low transport costs and the removal of tariffs under free trade agreements. This will help reduce the trade deficit with China.
These are really good opportunities but they should be seized in the most beneficial way. For example, the government needs to orient localities to select textile projects that have high technologies to protect the environment and save energy.
It’s important to pick large investors and effective projects.
What needs to be noted when the country calls for FDI in prioritized sectors?
The government has given priority to FDI in the sectors of high technology, agriculture, education, research and development and infrastructure. However, they are just the outlines.
The problem consists choosing the right projects. Localities and industrial park authorities are now allowed to grant licenses to FDI projects. However, a number of local officials are not aware of whether the foreign players really want to enter Vietnam.
Therefore, government agencies and localities need to find out the potential investors and their real intentions to avoid ‘paper’ projects that were seen in 2008 when pledged FDI reached $72 billion.
As Vietnam has and will sign a number of free trade agreements (FTAs) next year. What do you assess the impact of these deals on FDI flow to Vietnam?
Those pacts will give a boost to FDI.
Foreign investors are always keen on the market which they come to. A number of retail majors from Japan and South Korea have flocked to Vietnam.
The second sector that drives overseas investors’ attention is the export. Exports by foreign-invested enterprises account for up to 70% of Vietnam’s total export turnover.
For every FTA, no countries give anything for free. Vietnam needs to know how to give and receive. If we give up a part of our benefits, then partners will share their benefits in exchange.
There have been opinions that Vietnam has given excessive incentives for FIEs. What do you think about this?
When foreign investors bring billions of U.S. dollars into Vietnam, it’s comprehensible that they ask for preferential treatments. Whether we meet their demand or not is another issue.
We need to ensure that the incentives are reasonable. There are two types of preferential treatments: (i) incentives are equal for all businesses, and (ii) special ones decided by the prime minister for those projects that have great impact on the national economy.
These incentives are not given to foreign projects only, but equally for all sizable ones.
What are the most notable complaints that VAFIE members have conveyed to the association?
There have been numerous complaints. FIEs do not moan about the government as they have recognized big efforts the Vietnamese government has made.
They complain of the law enforcement instead. The most troubles they have encountered are with the customs, tax and environment management authorities. They even have been requested to give kickbacks.