The Politburo has issued Resolution No. 50-NQ/TW dated August 20, 2019 on orientations to perfect institutions and policies and to improve the quality and effectiveness of foreign investment cooperation until 2030.
| It is time for Vietnam to exercise the rights of selecting to improve the quality of FDI inflows, and not to attract them at all costs. (Picture for illustration)
This is the first time the Politburo has promulgated a thematic resolution to create a foundation for the selective attraction of foreign direct investment (FDI) capital, in accordance with Vietnam’s economic restructuring and growth model reforms in the new period of development.
Thus far since Vietnam opened the door to attract FDI (in 1988), this particular capital flow has always grown rapidly and effectively, becoming an important part of Vietnam’s economy and contributing actively to the country’s socio-economic development process. Nearly US$350 billion worth of FDI capital from 129 countries and territories has been poured into Vietnam, throughout all the 63 cities and provinces nationwide and across 19 out of 21 sectors in the economic sector classification system. The FDI sector currently plays a key role in Vietnam’s import and export balance, accounting for 70% of export revenues and nearly 60% of import turnover, making significant contributions to the state budget, creating millions of jobs and contributing to the formation of some new key industries.
The role of FDI in the Vietnamese economy is undeniable. However, throughout over 30 years of FDI attraction, limitations and shortcomings have proved inevitable during the implementation process. The FDI projects are mainly small-scale, using the outdated, labour-intensive and energy-consuming technologies which risk polluting the environment. The level of connectivity and spread of the FDI sector to the business sector and technology transfer is still low, while FDI attraction in a number of priority sectors and fields and from multinational corporations remains limited. Notably, a number of negative issues have emerged recently, such as increasing transfer pricing, “underground” investment, disguised investment via a number of Vietnamese organisations and individuals, and environmental protection violations.
On the basis of reviewing the reality of more than 30 years of FDI attraction, the Resolution No. 50 affirms that the foreign-invested economic sector is an important component of Vietnam’s economy, and is encouraged and facilitated in pursuing long-term development, cooperation and healthy competition with other economic sectors. The State respects and protects the legitimate and legal rights and interests of investors, while ensuring harmony of interests between the State, investors and employees in enterprises. From this guiding viewpoint, the Resolution clearly points out the orientations for FDI attraction in the coming period, which are to build and complete institutions and policies on foreign investment in accordance with development trends, approach international advanced standards and match with international commitments, and ensure synchronism, consistency, publicity, transparency and high competitiveness.
In addition, the Resolution urges for proactivity and selectiveness in foreign investment attraction and cooperation, with quality, efficiency, technology and environmental protection being the major assessment criteria. Priority should be given to projects applying new advanced technology, high technology, clean technology, modern governance, high added value, spillover effects and connections with the global supply and production chains. The Resolution requests the development of a set a goal of developing a specific list of FDI attraction restrictions in line with international commitments. Foreign investors outside the list are treated as equally as domestic investors. Particularly, Vietnam will formulate superior incentive policies and create favourable conditions to attract large projects, national key projects and high-tech projects, as well as attract strategic investors and multinational corporations to make investments, set up their headquarters and establish the research & development (R&D) and innovation centres in Vietnam
Alongside commitments to protecting foreign investor in Vietnam, the Resolution also targets to complete the institutions and policies concerning investment management and supervision, aiming to ensure foreign investors comply with policies and laws on labour, employment, wages and environmental protection during the process of investing and building accommodation for workers and associated infrastructure. Therefore, foreign investors pouring capital into Vietnam must also meet the requirements set by Vietnam, towards selecting the investors who really wish to cooperate for mutual development. It is time for Vietnam to exercise the rights of selecting to improve the quality of FDI inflows, and not to attract them at all costs.