FDI attraction, highlights and inadequacies

ABO/NDO - Foreign Direct Investment (FDI) inflows to Vietnam advanced spectacularly in the last two quarters of 2017, bringing the total amount of FDI pledges for 2017 to a 10-year record high. However, experts recommended a comprehensive review of the quality of FDI capital after the 'Formosa incident' in 2016.

Samsung Vietnam has actively built a network of first-level suppliers in Vietnam (credit: HA THU)

Prof. Dr. Nguyen Mai, former Vice Chairman of the State Committee for Cooperation and Investment recalled his attendance at a special event held by the Vietnam Posts and Telecommunications Group (VNPT) in 2001.

This was a ceremony to mark 10 years since concluding a cooperation agreement between VNPT and the Australia-based Telstra telecommunications and media corporation in 2001, which also served as an opportunity for VNPT to thank its partner, Mai said.

At the time of the cooperation agreement between VNPT and Telstra, the United States had not yet lifted its embargo against Vietnam. However, Telstra helped its Vietnamese partner to build a customer-oriented approach, improving business management capacity and training the human resources required, which serves as a perfect example of what Vietnam expects from FDI inflows.

Such factors reflect the quality of FDI inflows which help to create a strong spillover effect for the economy, Nguyen Mai said when speaking of the benefits of FDI attraction.

Positive signs were also seen in supporting industries, Mai said. Due to the unimpressive results of the first seminar on supporting industry held in 2014, Samsung Vietnam changed its method of selecting suppliers.

The Republic of Korea's tech giant sent their experts to meet with potential domestic producers and assist them in improving their management capacity; choosing suitable technology; and reducing energy consumption, inventory, and distribution costs, among other changes. After more than three years, domestic enterprises selected and supported by Samsung were in a position to become Samsung's domestic first-level suppliers.

Mai stated that a good relationship between FDI and domestic enterprises must come from the efforts of both sides.

Domestic enterprises should be confident and proactive in approaching FDI enterprises while renewing their technology, improving the quality of human resources, and seeking suitable niches to join the global supply chain. Meanwhile, FDI enterprises need to devise an effective cooperation strategy with Vietnamese enterprises and actively help Vietnamese enterprises to improve their capacity and draw up appropriate cooperation models in order to meet the demand of FDI enterprises.

Hiroaki Yashiro, an expert from Japan International Cooperation Agency (JICA) identified three factors for successful cooperation with Japanese enterprises including the implementation of corporate governance principles in compliance with international standards and the pursuance of efficiency and profitability.

A small and surprising factor in the efficient operation of factories is to keep areas clean and tidy. The JICA expert noted that through the observation of a factory, Japanese investors will assess the capacity of their partners more accurately than reading weighty documents detailing the company’s performance on paper. However, only a relatively small number of Vietnamese companies pay attention to this issue, resulting in many missed opportunities.

According to domestic and international experts, Vietnam will remain an attractive destination for foreign investors not only in 2018, but also in 2022 and 2023. This is an opportunity for Vietnam but the country also needs a "filter" to eliminate any risks to the sustainable development of the country.

Aside from the efforts of partners, the State also plays a very important role in creating a policy system that motivates and facilitates investors in order to take full advantage of emerging opportunities.

"Whether the good prospects come true or not depends on the government's efforts to reform and simplify administrative procedures and build a transparent, open, and stable policy system which is strictly enforced," Prof. Nguyen Mai said.

(Source: NDO)