Looking back on 30 years of FDI in Vietnam: Better governance will guarantee successes

Recently, the Government has assigned the Ministry of Planning and Investment (MPI) to evaluate the results of 30-years of attracting the FDI. On this occasion, Ph.D. Phan Huu Thang, former Director General of the Foreign Investment Agency (under the MPI), sent his article on this topic to TheLEADER.

In the first seven months of 2017, implemented FDI capital reached US$9.05 billion, increasing by 5.8% compared to the same period of 2016. The registered capital reached over US$21.93 billion, year-on-year increasing by 52%. A large number of large-scale projects continued to invest in Vietnam. Exports of FDI enterprises continued to grow at a high rate, which generates stable revenue for the budget and creates even more jobs.

The continuously improved administration has brought the significant foreign investment capital, which accounts for 25% of the total social investment capital per year, with high-quality technology and management experience to the economy.

This source of funds has enabled Vietnam to industrialise and modernise its agro-based economy with higher production capacity. New industries and lines of products have been created. More industrial parks being built creates jobs for millions of workers and increases the contribution to the State budget over the years.

This capital also helped Vietnam increase its exports and accelerate the integration process into the global economy. Therefore, the position of Vietnam is strengthened in the world.

FDI also indirectly promotes the development of many Vietnamese enterprises. So far, there are many “made-in-Vietnam” valuable goods and services to be known and trusted in the regional and world markets.

However, in the development process, due to numerous different reasons such as human resources lacking in-depth training, hence being weak in expertise and irresponsible, FDI activities also led to serious incidents. The problem of FORMOSA in 2016 is one of the biggest failures in FDI attraction nowadays.

Another thing is the negative impact that many FDI enterprises have posed on the environment. This is mainly caused by poor management at all levels within the FDI firms and in the authorities.

There are still other points. After 30 years of attracting FDI, the link between FDI businesses and Vietnamese ones is still weak. As many as 82% of FDI projects up to July 20th, 2017 is 100% foreign-owned. Vietnamese enterprises are still absent in the production value chain right here in Vietnam, not to mention the globe. The supporting industry being still underdeveloped is a clear evidence.

The domination of export and domestic markets by FDI firms tends to increase. If the governance is not sufficient (in direction, vision and specific implementation), the target of a Vietnam's self-reliant economy will be challenging, which will lead to other consequences for the nation.

Also, the imbalance in the proportion of strategic investors in Vietnam (lack of European investors in top 10 foreign partners having the largest FDI in Vietnam as of July 20th, 2017) also implies potential risks for this target.