Asia Times: Hanoi likes what it sees, wants more


	June 16, 2001	atimes.com

Southeast Asia

Hanoi likes what it sees, wants more

HANOI - Vietnam's Ministry of Planning and Investment (MPI) has announced that it will attempt to attract US$11 billion in foreign direct investment (FDI) into the country over the next five years.

The new FDI target comes after the release of figures showing that in the first five months of 2001, 150 projects worth $881 million were licensed - representing year-on-year growth of 58 percent. MPI officials said tough conditions in the international economy meant the country was unlikely to be able to repeat the 1996-2000 achievement of $12.8 billion in registered foreign investment. But they said the new target would furnish almost 20 percent of Vietnam's capital needs.

Most of this year's foreign capital has been pledged to industrial projects, with just $11.5 million going to the agricultural sector. Some of the major projects included the Phu My No 3 electricity project in Ba Ria-Vung Tau province ($413 million), and farm produce processor and distributor Metro Cash & Carry Vietnam ($120 million).

In May alone,11 projects capitalized at $426 million were licensed.

The MPI predicts foreign capital inflows will remain positive for the rest of the year, but warns that new government initiatives will be required to keep up the momentum.

MPI officials said one of the main priorities was to align foreign investment policy more closely with the overall socio-economic development strategy. New laws should be introduced to level the playing field between foreign and domestic investors and ensure foreign capital goes to a wide variety of projects. Included in these moves should be continued efforts to end the dual price system, lowering prices for foreigners until they match those faced by Vietnamese people.

Administrative reform should be fast-tracked, cutting back red tape and bureaucratic inefficiency. This would also speed up the equitization of Vietnamese companies, encouraging more foreign investment. The MPI also said Vietnamese staff should be trained to manage joint venture companies, and improve the effectiveness of trade unions in foreign-capitalized enterprises.

Further positive policy proposals came out of a recent meeting, entitled Heading For Success, between government officials and foreign investors. Participants cited the country's Law on Foreign Direct Investment as a positive factor. But there was much discussion of hot topics such as investment procedures, land-use rights, income tax reform, and the use of hard currency and local laborers.

Some said the regulations on labor and input costs were making their investment in Vietnam more expensive than they had initially predicted. This was off-setting the competitive savings that can be made by operating here, they said.

The MPI plans to overhaul its investment promotion work, to make its policies more active and flexible. Its officials have vowed to work with international organizations from the Asia-Pacific, Europe, Germany and Japan, to hold conferences and promote the benefits of doing business in Vietnam. The ministry will also take a more hands-on approach, seeking closer ties with individual investors and projects. It will accelerate development of the "one door and one seal" concept, allowing investors to process applications with only one central department rather than becoming lost in a complicated command structure.

Procedures governing the granting of investment licences are also up for review. Deputy Planning and Investment Minister Vu Huy Hoang said the government would continue to focus on decentralization, allowing local authorities to grant licences and speed up FDI projects. Hoang also highlighted preparations for the equitization of FDI businesses and efforts to give them access to local money markets. The ministry will draw up and publish a list of projects needing investment in the third quarter of this year.

The government will encourage foreign investors to focus on high-tech projects in the country's industrial parks and export processing zones. Information technology, chemicals manufacturing and electronic equipment will be priority sectors.

FDI has played an increasingly important role in the country's development. Vietnam has licensed $36 billion worth of foreign registered capital since opening its doors to international funds, spread across 2,700 projects.

Foreign operating capital has hit $20 billion, making up one-quarter of the country's total investment capital. Half of the total registered FDI projects have been put into operation so far, making up 12 pecent of the country's total gross domestic product. Foreign firms account for more than 34 percent of industrial output.

Aside from contributing 7 percent of the nation's tax receipts, the FDI sector has also created jobs for close to 35,000 employees. The presence of foreign investors has also helped promote the country's integration process.

(Asia Pulse)

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