Prime Minister Nguyen Xuan Phuc. Source: VGP.
As of present, Vietnam has attracted 26,500 foreign invested projects from 129 countries and territories with registered capital of US$334 billion. The FDI sector also employs over 4 million direct employees, and 5 – 6 million indirect employees, Phuc said at a meeting summarizing 30 years of Vietnam’s FDI attraction on October 4.
During the 30-year period, Vietnam has overcome numerous challenges to become a middle-income country, averaging annual growth rate of 6.6%.
According to Phuc, Vietnam’s decision to open its economy to the FDI has proven decisive, helping the country achieve multiple socio-economic development objectives.
The move has been in line with Vietnam’s effort of integrating into global economy and enhancing its status in the international arena.
“Vietnam is one of the most successful countries in the region and on global scale in terms of FDI attraction,” Phuc said.
However, there remains challenges and issues that Vietnam must address towards the goal of sustainable development, especially in the context of the Fourth Industrial Revolution, he continued.
In Vietnam, most FDI enterprises are using low to medium technologies, while only a few of high technology corporations at global level are investing in the country.
Additionally, the linkage and technology transfer activities between the FDI and domestic sectors left much to be desired. Current FDI projects in Vietnam mainly focus on assembly and processing stages with low localization rates, resulting in low added value.
“There are also risks of environmental pollution and foreign invested companies engage in transfer pricing and tax evasion,” Phuc stated.
Nevertheless, Vietnam considers the FDI sector as an engine for growth, and is confident to maintain its policy of encouraging foreign investments.
Steps in future
Phuc pointed to some important steps as part of Vietnam’s strategy to attract the FDI in the future.
Firstly, Vietnam will not only attract foreign capital, but also promote cooperation through M&A activities between domestic and the FDI sectors, ensuring environmental protection and social benefits.
“Vietnam will play an active role in choosing suitable FDI projects in the new development stage,” Phuc stated.
Secondly, a better linkage between the FDI and domestic sectors will facilitate the growth of supporting industries, helping local enterprises integrate integrate in regional and global value chains. Moreover, Vietnamese enterprises should explore the opportunities to acquire foreign companies, in turn acquiring technologies and distribution channels.
Vietnam gives priority to environmentally friendly projects using the most modern technologies. In rural areas, Vietnam encourages intensive-labor projects, while more high tech projects are preferred in urban areas. According to Phuc, this is considered way to achieve inclusive growth.
Overall, Phuc stressed the importance of maintaining stable macro economy, developing infrastructure and quality human resources. Vietnam will continue reform its legal framework in compatibility with international commitments.
“It is our objective to create a favorable and competitive business environment for all economic groups to thrive,” the PM concluded.
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