Next-generation FDI: what’s the new strategy?

Last update 16:00 | 04/12/2017
 VietNamNet Bridge – The draft strategy on attracting FDI in 2018-2023 is being compiled by the Ministry of Planning and Investment (MPI) with support from the World Bank. 

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MPI is drafting the strategy on attracting FDI in 2018-2023

After 30 years of foreign investment, 24,000 projects with total investment capital of $313 billion have been implemented in Vietnam. FDI accounts for 25 percent of total investment capital and makes up 20 percent of GDP.

Vietnam, in an effort to attract FDI, has pursued an open policy, offering many incentives to investors.

Analysts say the policy has problems and is no longer suited to the new circumstances. Vietnam needs a new strategy for the next development period.

Most foreign investors told the World Bank that Vietnam has offered big investment incentives and has a cheap labor force.

However, after a six-month study, Wim Douw, a senior expert on investment, trade and competition from the World Bank, found that Vietnam’s advantage of a cheap labor force is disappearing.

In the context of global integration, Vietnam has to develop its economy on the basis of labor skills, technology and production chains. 

In the context of global integration, Vietnam has to develop its economy on the basis of labor skills, technology and production chains.

Commenting about the current investment situation, David Brown, WB’s senior advisor on investment policy, said Vietnam relies on incentives to attract investors.

Brown suggested that Vietnam needs to change its policy on attracting FDI based on low labor costs and preferential treatment, while local authorities need to stop running a race of offering incentives to lure investors. State management agencies need to remove the barriers to businesses to join the market.

Nguyen Anh Tuan, former deputy director of FIA, also thinks that in the context of the fourth industrial revolution, Vietnam needs to have an FDI attraction policy which does not aim to get FDI at any cost.

Meanwhile, Truong Thi Chi Binh, director of SIDEC, stressed that the next-generation FDI policy needs to set up policies that encourage foreign investors to build production networks in Vietnam.

“Large multinational conglomerates such as Samsung and Intel have their factories in Vietnam, but the factories only do simple assembling,” Binh said.

“We need to think of solutions which can help retain them, encourage them to expand production chains in Vietnam and transfer technology,” she said.

Simon Bell from the World Bank noted that experts have emphasized the need to attract investment in projects which create high added value, but they do not show how to do it and which business fields should be the focus.

Experts believe Vietnam should focus on high-tech/ICT, processing and manufacturing, supporting industries, tourism, and high-tech agriculture.

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