It’s difficult to drive FDI flow to the true tracks

It’s difficult to drive FDI flow to the true tracks

VietNamNet Bridge – The foreign direct investment (FDI) will automatically flow to the most profitable business fields. If Vietnam wants to drive the FDI flow to the addresses it wants, it has to apply reasonable policies and offer reasonable incentives.

The government of Vietnam has vowed to change the direction of the FDI flow to Vietnam, striving to attract high quality projects to the business fields that it prioritizes to develop instead of accepting any investment projects at any scale. However, experts have warned that this would be not an easy task.

FDI on the decrease?

The FDI registered capital unexpected dropped sharply in the first month of 2012: foreign investors only registered 25 projects capitalized at 29.5 million dollars in total. If counting on the 7.8 million dollars worth of additional capital, in January, Vietnam could only attract 37.3 million dollars worth of foreign invested projects, just equal to 3 percent of the same period of the last year.

The Foreign Investment Agency (FIA) under the Ministry of Planning and Investment (MPI) believes that the figure did not truly reflect the FDI tendency. The long Tet holiday partially affected the licensing process. Meanwhile, some investors asked to delay the licensing day, because they would like to receive license in the Year of Dragon.

Phan Huu Thang, Director of the Foreign Investment Research Center, said that it’s still too early to come to a conclusion that the FDI is on the decrease if just considering the figure in January, but this should be seen as the warning about the necessity to apply reasonable policies to attract FDI.

Thang said that Vietnam now in the second FDI capital recession stage which began in 2009. The thing that Vietnam needs to do is to shorten the recession stage to kick off a new development period.

One of the biggest problems in attracting FDI is that Vietnam attracts many projects and big investment capital, but the disbursement rate is very slow. The amount of capital, registered but not disbursed has reached 108 billion dollars, while 13,000 projects have been going slowly, which has led to the waste of land, the breaking of development programs and many other social consequences.

It’s not the investors to blame on

As the ODA (official development assistance) capital has been decreasing, Vietnam is striving to attract more FDI, because the capital is really very important for a developing economy like Vietnam. 

Statistics show that ODA capital accounts for 28 percent of the total investment capital of the whole society.

However, experts say, Vietnam should not attract FDI at any costs, while it should welcome hi-tech projects and the projects in the business fields that Vietnam prioritizes to develop, and refuse the labor intensive projects and the projects in the manufacturing sector that cause the pollution to the environment.

However, the FDI capital has not been going the way Vietnam wants. In late 2011, President of Las Vegas Sands expressed his intention to pour six billion dollars to the two resort complexes in Vietnam. However, as the complexes are expected to contain casinos, the investor still has not received any official answer from the government of Vietnam.

Analysts have pointed out that the mammoth projects are usually in the fields of real estate, accommodation service and non-production sectors. Especially, very few investors want to inject their money in the fields Vietnam wants to invite them to, including agriculture, industrial processing and hi-tech branches.

Vo Tri Thanh, Deputy Head of the Central Institute for Economic Management CIEM, said that one should not blame on foreign investors for the high proportion of FDI projects in the real estate sector. In principle, investors will only pour money into profitable fields. If Vietnam wants to drive the FDI flow, it needs to offer reasonable policies.

Source: NLD