Vietnam will pay more attention to disbursing foreign direct investment capital rather than increasing the amount of registered capital in 2012, says the Ministry of Planning and Investment (MPI).
The MPI’s Foreign Investment Agency (FIA) estimates this year’s FDI attraction at US$15-16 billion, US$1 billion higher than last year, and FDI disbursement at US$11 billion.
FIA Director General Do Nhat Hoang says over the years, many foreign investors have kept pouring money into factories in Vietnam in order to make the most of investment and tax incentives applied for made-in-Vietnam and made-in-ASEAN products. They are keen to import goods to the country and re-export it after relabelling.
In addition, many tend to maintain or even expand their production despite their claim to have suffered huge losses for years. What they usually do to dodge corporate income tax is to import input materials and machines from their parent companies at high prices and sell products to parent companies cheaply. This will cause a tax dodge and create an unfair business environment in Vietnam.
According to economists, if the problem remains unsolved, FDI businesses will also take liberties with Vietnamese laws.
The MPI will try to reduce the number of unsuccessful projects and focus more on industry, construction, high technology, and renewable energy, Hoang says.
MPI Deputy Minister Nguyen The Phuong says his ministry will change its way of investment promotion, with a focus on those investors who can meet Vietnam’s demand, especially for developing “green” technologies.
The Prime Minister has asked the MPI to work with related agencies to build a National Green Growth Strategy Framework for 2011-2020, which is aimed at developing new types of energy and attracting high-tech projects, Phuong says.
Phuong says the MPI will take the initiative to work with those groups to offer them preferential incentives.
At a recent conference on foreign investment in the northern region, Nguyen Xuan Doan, Deputy Director of the Hai Duong provincial Department of Planning and Investment, said his province considers investment attraction essential for its development but there are also other important factors such as the authorities’ behaviour towards investors and local infrastructure.
The decrease in last year’s FDI inflows was a warning sign for Vietnam. It is much likely that the FDI will flow into other ASEAN countries such as Indonesia and Thailand, or even Myanmar and Cambodia as high interest rates, tight fiscal policies, and other macro policies on tax and land are posing challenges to Vietnam.
Economists say it is high time Vietnam improved the quality and sustainability of FDI capital. Despite the shortage of FDI capital, the country still has to loosen its controls to attract foreign investment.
In other words, they argue, the strategy to attract foreign investment should take into consideration both sides of FDI inflows to keep a good balance between stimulating growth and building a modern, high-quality, and sustainable economic structure.
Instead of introducing incentives, the strategy should be focused on improving the business environment, upgrading the infrastructure, and developing the human resources.
Source: VNA/VOV