Proposed investment cap policy might cause Vietnam to lose FDI attraction opportunities

28-Feb-2019 Intellasia | Hanoi Times | 6:00 AM Print This Post

Vietnam cannot meet the target even with costly investment promotion programmes to attract FDI capital in case the global investment capital flow is tightened.

As the proportion of foreign direct investment (FDI) inflow to Vietnam’s total development investment capital is proposed to be capped at 20-25 percent next time, experts are concerned the policy can prevent the country from luring the inflow, especially high quality one.

Vietnam is mapping out targets for FDI inflow till 2030 under a project titled ‘Orientation to improve regulations and policies to enhance quality and efficiency of attracting and using FDI capital by 2030′, in which the ratio of foreign investment capital in the total development investment capital of the whole society is proposed at an average level of about 20-25 percent.

The proposal remains controversial, but for those who have a positive perspective on foreign investment, such a cap might cause Vietnam to lose many opportunities in FDI attraction, especially from the world’s leading groups whose projects have total investment of dozens billions of US dollars and disbursement is often very fast.

According to Dao Hoang Tuan, deputy director of the International Training Institute under the Institute of Policy and Development, the evaluation of foreign investment contributions should be placed in the context of the world’s capital flow. Setting quantitative targets for FDI attraction, such as the above 20-25 per cent ratio, is unreasonable in terms of economic benefits.

Vietnam cannot meet the target even with costly investment promotion programmes to attract FDI capital in case the global investment capital flow is tightened, Tuan explained. vice verse, at times of the global investment capital boom, Vietnam can attract a lot and the country should not set a cap to restrain the inflow.

Sharing the same view, Vu Thi Chau Quynh, deputy director of the Ministry of Planning and Investment (MPI)’s Legal Department, proposed in any case, Vietnam should not give a specific rate on capping FDI capital, especially when the world economy is constantly changing.

“The rate, if being approved, will be put in a resolution of the Politburo so if there are adverse impacts from the world’s investment capital inflow, we cannot issue another resolution to replace it immediately,” Quynh said.

Net benefit criteria proposed

Deputy minister of Planning and Investment Vu Dai Thang said it will be very difficult to set a specific rate for the country’s FDI attraction in the near future, suggesting the project’s drafting board should consult more international experiences to be able to come up with suitable targets.

“It is necessary to consider and evaluate through international experiences related the issue. For example, foreign investment capital in Singapore accounts for more than 90 percent of the total development investment capital, but the rate is very low in some other countries,” Thang said, asking where did the rate of 20-25 percent come from? Did it come from Vietnam’s own experiences over the past time?

Thang also noted the rate is different in 63 provinces and cities of Vietnam. While it is on a downward trend in big cities like Hanoi and Hai Phong, it keeps rising in other locations such as Binh Duong and Dong Nai.

“If we fix the rate at only 20-25 percent, we have to refuse to license big investors whose projects disburse $10-20 billion yearly as it will exceed the allowed threshold,” Thang said.

Instead of setting a fixed rate, based on international experiences, MPI’s Quynh suggested that the drafting board should set net benefit criteria based on a number of factors, such as impacts of the FDI inflow on the nation’s economy and employment, as well as the use of local resources and services for domestic and exported goods.


Category: Economy, Vietnam

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