Vietnam needs a new filter for better foreign investment inflow

Experts have called on the Vietnamese government to set new standards to sort out investment projects so as to ensure that foreign capital inflow into the country is truly qualified and environmentally friendly.

Vietnam will prioritize projects with environmentally-friendly technology.

The move was made after the emergence of new trends in foreign investment inflow into Vietnam last year, including a rapid growth in investment from mainland China and Hong Kong.

Reports from the Foreign Investment Agency (FIA) under the Ministry of Planning and Investment showed that the number of FDI commitments from mainland China and Hong Kong last year hit a record high of US$7.87 billion.

According to Nguyen Huu Thang, former general director of FIA, though the acceleration of capital shift was attributed to impacts of the US-China trade friction and the current instability situation in Hong Kong, many experts still express certain concerns on the quality of the projects relocated to Vietnam, and who the investors actually are.

“So now may be the time to install a filter for foreign investors so that the country can choose those who are really capable and come with green initiatives, because the period of ‘red carpet’ welcome for all investors is over ,” Thang stressed.

Investment screening is necessary to select and protect the prestige of investors – those who have the record of compliance with laws on investment of the host country, Thang explained, adding that at the same time, such a procedure protects the development of foreign investment in Vietnam in the coming period.

With a proper filter, Vietnam will identify the trend of foreign investment inflows in the coming period, ensuring the highest efficiency and space for true investors in the country, he said.

Fresh direction

Vietnam has so far also outlined primary strategies to lure high quality foreign investment until 2030 under the Politburo’s Resolution No.50-NQ-TW issued last August.

The resolution pointed out that institutions and policies regarding foreign investment have yet to suit development requirements, adding that the number of small-scale and low-tech projects  remains high, the foreign-invested businesses have so far failed to produce the sufficient spillover effects to other economic sectors , and the localization ratio remains modest.

Under the resolution, projects with advanced and environmentally-friendly technology and high added value will be prioritized, along with the need to diversify partners and investment methods. The ratio of businesses using advanced technology and modern management without harming the environment is expected to increase to 50% in 2025 and 100% in 2030.

According to Thang, this is a particularly important resolution that needs to be seriously implemented from the central to local levels as it will promote activities of attracting and using foreign investment in Vietnam in the coming period in the right direction, bringing higher socio-economic efficiency and sustainability in all aspects of economy and society, security, defense, culture, and foreign affairs. Most importantly, it will surely get the consensus and appreciation of international partners, especially of true investors.

Deputy Minister of Planning and Investment Vu Dai Thang said that reform of legal policy and development of infrastructure and human resources are the three key factors for Vietnam to efficiently welcome new-generation and high-quality FDI. In the resolution, legal reform is the premise in the path.

Thus far, Thang said, the Ministry of Planning and Investment has institutionalized directions in the resolution through the amendments of the Law on Investment 2014 and the Law on Enterprises 2014 as well as the drafting of the Law on Public-Private Partnership.