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MPI to evaluate impact of 30 years of FDI

Released at: 09:55, 16/08/2017

MPI to evaluate impact of 30 years of FDI

Illustrative image (Source: .htv.com.vn)

Report to include results from different ministries and departments, experts, and business associations regarding FDI attraction and management.

by Quang Huy

The Ministry of Planning and Investment (MPI) is drawing up a report evaluating the impact of foreign direct investment (FDI) in Vietnam during the 30 years since the Law on Foreign Direct Investment opened the country’s doors to multinational companies.

“Since 1987, the FDI sector has helped restructure Vietnam’s economy, increasing export turnover, expanding the country’s reach to world markets, generating jobs, acquiring technology transfer and management skills, and attaining global economic integration,” Deputy Minister of Planning and Investment Nguyen Van Trung told a ministerial meeting last week.

He said the report will include results from different ministries and departments, experts, and business associations regarding FDI attraction and management, while going into detail on other key issues relating to FDI, such as support industries, technology transfer, infrastructure, the high-tech agriculture and service sectors, as well as preferential policies and taxation and the prospects for the future.

“The fact that only 27 per cent of total FDI production input is generated by domestic producers, and only 36 per cent of Vietnamese firms now participate in the FDI production network remains a concern,” Deputy Minister Trung noted.

There are also limits on different economic sectors in terms of FDI attraction, less than desired technological advances, and some unresolved legal matters pertaining to environmental protection, taxation, and transfer pricing. Despite its key role and major successes, critics point to less-than-expected investment results, added value, and value chain integration.

From pledged and disbursed FDI of $1.56 billion and $262.5 million, respectively, during the 1988-1990 period, the 30th anniversary of the Law on Foreign Direct Investment marks another milestone, with disbursed FDI to exceed $16 billion and pledged FDI to increase to $28 billion in 2017, according to Deputy Minister of Planning and Investment Dang Huy Dong.

That compares with last year’s $24.4 billion of pledged FDI and record disbursed FDI of $15.8 billion. “FDI growth is very impressive so far this year and we expect it to continue,” Deputy Minister Dong said. “We aim to draw more FDI into export-oriented, energy, and high-technology fields” by building a more business-friendly environment, he said.

Figures from the ministry show that accumulated capital invested in Vietnam as at the end of July stood at $307.86 billion in registered capital and $163.9 billion in disbursed capital.

Capital flows are divided among 19 branches of the economy in the country’s 63 cities and provinces. Notable branches include the manufacturing sector, with $181.8 billion in FDI over the last three decades, the real estate sector with $51.6 billion, and the electronics sector with $18.4 billion.

Of the 122 countries and territories whose corporations have set up production in Vietnam, South Korea holds the lead with $55.26 billion in FDI, followed by Japan with $46.47 billion and Singapore with $41.6 billion.

More than 23,000 FDI companies are operating in Vietnam, contributing 22 to 25 per cent of social capital and up to 15 per cent of the State budget. FDI companies now employ about 7 per cent of the country’s workforce and account for more than 70 per cent of total export turnover.

Data from the World Bank shows that as at the end of 2016, the FDI sector had contributed around 19 per cent of Vietnam’s GDP; almost double the rate recorded in 2000.

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