Illustrative image (Source: VNA) HCM City (VNS/VNA) - In thefirst eight months of the year Vietnam attracted foreign investment worth morethan 23.36 billion USD, a year-on-year increase of 45.1 percent.
Though it was rightly hailed by all, theMinistry of Planning and Investment (MPI) in a recent report listed severalshortcomings, one of which was the rapid increase in the number of projectswith very little capital.
In fact, the number of projects withcapital of below 1 million USD accounted for 65 percent of all projects duringthis period.
The average size was 3.8 million USD, rathermodest, according to experts.
Experts have been warning for a long timethat foreign-owned projects are getting smaller, but the issue has not beenaddressed so far.
For instance, last year the Cửu Long(Mekong) Delta province of An Giang attracted only one foreign project and itwas worth all of 20,000 USD.
Similar sized projects have been seen evenin major cities like Hanoi, Da Nang and HCM City.
HCM City last year licensed 836 FDIprojects whose capital added over 1 billion USD, meaning each was worth nearly 1.2 million USD.
In Da Nang too, most FDI projects last yearaveraged around 1 million USD worth of capital.
Analysts said though the Government makesgreat efforts to attract investors, the number of those from countries like theUS, Germany and France remains modest, with many big players still hesitant toinvest in Vietnam.
This is because Vietnam has yet to reallymeet three requirements: publicity for and transparency in fighting againstcorruption; preventing violations of intellectual property rights and thecontinuing problem of red tape though Vietnam has made great progress inadministrative reform.
Some experts blame the situation onauthorised agencies’ poor ability to assess FDI projects before grantinginvestment licences.
One of the consequences is that many FDIprojects have limited resources and use outdated technology and equipment thatcause pollution.
Analysts said there are differences betweenthe FDI regimes of Vietnam and other countries, explaining that Vietnam is verycareful in granting licences but is lax in overseeing their businessactivities.
On the other hand, others make it easy forforeign investors to get licences but carefully monitor their activitiessubsequently.
After reviewing FDI inflows in the last fewyears, MPI experts realised the necessity to fix a minimum capital requirementfor foreign investors wanting to come to the country.
Small projects, including foreign-investedones, often face major challenges in their early days caused by their size. They focus on assembling instead of production, their use of localcontent is low, their exports are mainly based on outsourcing, they arelabour-intensive – as in the so-called, much derided sweat shops -- and createlittle value addition.
They are of little help to the Vietnameseeconomic or business set-up because they are unable to transfer technology to localcompanies, thus failing the Government’s policy of attracting FDI to helpimprove domestic technological capacity.
The ratio of FDI companies in themanufacturing and processing sectors has plummeted in recent years to 20-30 percentfrom 70-80 percent earlier.
A majority of them have capital rangingfrom a few dozen thousands of dollar to hundreds of thousands of dollar anduse simple technologies.
Analysts stressed the need to attract FDIselectively to improve quality and allow only domestic companies in areas wherethey can do well.-VNA
Though it was rightly hailed by all, theMinistry of Planning and Investment (MPI) in a recent report listed severalshortcomings, one of which was the rapid increase in the number of projectswith very little capital.
In fact, the number of projects withcapital of below 1 million USD accounted for 65 percent of all projects duringthis period.
The average size was 3.8 million USD, rathermodest, according to experts.
Experts have been warning for a long timethat foreign-owned projects are getting smaller, but the issue has not beenaddressed so far.
For instance, last year the Cửu Long(Mekong) Delta province of An Giang attracted only one foreign project and itwas worth all of 20,000 USD.
Similar sized projects have been seen evenin major cities like Hanoi, Da Nang and HCM City.
HCM City last year licensed 836 FDIprojects whose capital added over 1 billion USD, meaning each was worth nearly 1.2 million USD.
In Da Nang too, most FDI projects last yearaveraged around 1 million USD worth of capital.
Analysts said though the Government makesgreat efforts to attract investors, the number of those from countries like theUS, Germany and France remains modest, with many big players still hesitant toinvest in Vietnam.
This is because Vietnam has yet to reallymeet three requirements: publicity for and transparency in fighting againstcorruption; preventing violations of intellectual property rights and thecontinuing problem of red tape though Vietnam has made great progress inadministrative reform.
Some experts blame the situation onauthorised agencies’ poor ability to assess FDI projects before grantinginvestment licences.
One of the consequences is that many FDIprojects have limited resources and use outdated technology and equipment thatcause pollution.
Analysts said there are differences betweenthe FDI regimes of Vietnam and other countries, explaining that Vietnam is verycareful in granting licences but is lax in overseeing their businessactivities.
On the other hand, others make it easy forforeign investors to get licences but carefully monitor their activitiessubsequently.
After reviewing FDI inflows in the last fewyears, MPI experts realised the necessity to fix a minimum capital requirementfor foreign investors wanting to come to the country.
Small projects, including foreign-investedones, often face major challenges in their early days caused by their size. They focus on assembling instead of production, their use of localcontent is low, their exports are mainly based on outsourcing, they arelabour-intensive – as in the so-called, much derided sweat shops -- and createlittle value addition.
They are of little help to the Vietnameseeconomic or business set-up because they are unable to transfer technology to localcompanies, thus failing the Government’s policy of attracting FDI to helpimprove domestic technological capacity.
The ratio of FDI companies in themanufacturing and processing sectors has plummeted in recent years to 20-30 percentfrom 70-80 percent earlier.
A majority of them have capital rangingfrom a few dozen thousands of dollar to hundreds of thousands of dollar anduse simple technologies.
Analysts stressed the need to attract FDIselectively to improve quality and allow only domestic companies in areas wherethey can do well.-VNA
VNA
