National Focus

Weak linkages between domestic and FDI businesses still exist

By Anh Nguyen July 04, 2018 | 04:13 PM GMT+7

The linkages between domestic and foreign direct investment (FDI) business have not been as good as expected, even weaker than Laos and Cambodia, resulting in a low development of supporting industries and technology transfer.

Speaking at the event “Midterm Vietnam Business Forum 2018” held today, Nguyen Chi Dung, Minister of Planning and Investment said that the Vietnamese business community, including domestic and foreign enterprises, has grown rapidly, contributing to the growth of Vietnam's economy in the recent years.

"Currently, 128 countries and territories have invested in Vietnam with about 26,000 FDI projects, accounting for a total registered capital of over $326 billion," said Dung.

He added, "FDI plays a crucial role in the Vietnamese economy, contributing about 25 per cent of total social investment and about 20 per cent of GDP."

The scene of the event

Nevertheless, the linkages between the FDI sector and the domestic business sector joining the value chain have not been as good as expected, even weaker than Laos and Cambodia, resulting in a low development of supporting industries and technology transfer.

According to Vu Tien Loc, Chairman of Vietnam Chamber of Commerce and Industry (VCCI), the capacity and quality of domestic enterprises are still limited and difficult to meet the requirements and standards of production and business of FDI partners. More focus and effort are needed in order to improve the issue.

Vu Tien Loc, Chairman of VCCI

In addition, many businesses expressed great concerns about the burden of tax and customs as well as environmental issues in Vietnam. In particular, these factors are argued to be lessening the attractiveness of Vietnam business environment in the eyes of foreign enterprises.

Not only enterprises from Asia but also organisations like European Chamber of Commerce (EUROCHAM), American Business Association (AMCHAM) and the British Business Group Vietnam (BBGV), all agreed that many challenges still present in the field of taxation and customs.

Based on the viewpoint of BBGV, inspections and audits have become more and more confrontational and aggressive with "scare" tactics being used in some cases, giving rise to concern from foreign investors about the tactics and transparency. 

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