Continue institutional reform, creating a more favorable and open environment to attract FDI enterprises

At the Talk Show, commenting on the view that foreign direct investment (FDI) investors are receiving more incentives than domestic investors, Minister Nguyen Chi Dung said that with the current regulations of Vietnam’s law, this view is inaccurate. Before the year 2005, the corporate income tax for domestic enterprises was 32%, while for foreign enterprises were 18-25%. After that, foreign enterprises were entitled to preferential import tax policies while domestic enterprises were not. In 2005, the Law on Foreign Investment 2000 and the Law on Domestic Investment Promotion were unified and uniformly stipulated that there is no preference for foreign enterprises over domestic ones. In addition, foreign investment is currently still facing certain barriers in approaching the market, Vietnam's WTO commitments on an open market to foreign investment have not yet met the expectation.

Minister Nguyen Chi Dung said that foreign investment attraction is a game, a competition between countries with limited resources, and where there is a good investment environment, favorable, open and stable institutions, with benefits, FDI enterprises will focus investment. Therefore, if we facilitate favorable conditions with preferential, supportive, friendly mechanisms and create assurance for investors, they will see the efficiency and invest.

Until now, our perception, our way of thinking and vision have been constantly changing, adapting to the work of managing and efficiently using FDI resources toward approaching international modern technologies, reaching close to the principles of market economy and competition among countries around the world. Accordingly, we have been continuously adjusting our policies to create a sound environment to attract investors.

The value of FDI is different in nature, scale, and so far it has changed completely as compared to the early period.

Sharing on the real value of FDI before as compared to the time being, Minister Nguyen Chi Dung said that the reform policy has been officially implemented since the Sixth Congress of the Communist Party of Vietnam in 1986. Accordingly, we decided to implement the innovative process, determined the transformation of the economy, from a concentrated economy based on administrative subsidies to a market, international integration, investment attraction economy. The economy at that time faced many difficulties, the GDP growth rate in that period was only 4.4%, the economy’s scale in 1989 was 6.29 billion USD, the economy was in crisis with 3 digit inflation, the industry and agriculture were mostly exhausted, the country has more than 90% of its production in agriculture but lack of food. In that context, Vietnam made a right, accurate and timely decision that changed the economy of the country. Also in that time, although we had not yet imagined the scale of foreign investment, we had determined to formulate and promulgate the Foreign Investment Law.

At that time, Vietnam encouraged the production of substitutes for imported goods to create more jobs for workers. The number, sizes of enterprises and characters of each project was very simple, small. At the next stage, we began to focus on export to ensure the balance of payments, avoid trade deficit; concentrate on creating services to attract and balance foreign currency. Next, we focused on high technology, source technology, attracting investments of transnational corporations. At the present stage, we concentrate on another direction, which is to ensure sustainable development, to be linked to the process of reform, economic restructuring, growth model innovation, linking and creating spillover effects with domestic enterprises. These show that in each stage the value of FDI is different in terms of nature and scale and so far it has changed completely compared to the early period.

Linkages between domestic and foreign enterprises for mutual development

Minister Nguyen Chi Dung once compared FDI enterprise with a bee, because when a bee goes for honey, it does not only ensure its survival but also pollinate flowers for fruiting. Foreign investors do the same thing, when they invest, it must come with benefits, efficiency, and their investments contribute to the economy in an indirect way, such as creating capital resources, jobs, and values for the economy, and having a part in the State budget revenues, poverty reduction, urban and rural development, etc.

Sharing the lessons learned in the 30 years of FDI attraction, Minister Nguyen Chi Dung said that, the FDI sector has significant resources, but domestic enterprises are crucial, because now the FDI sector’s capital is only accounting for 25% of the total social investment while domestic resources are considered to play an essential role. Therefore, we must focus on developing domestic enterprises, supporting domestic enterprises to release production capability, liberate and mobilize domestic resources. This is a very precious lesson, Minister Nguyen Chi Dung emphasized.

In addition, the linkage between the FDI sector and the domestic enterprises sector to jointly participate in value chains has not yet met the expectation, the development of supporting industries and technology transfer activities is still at a low level, these are great lessons to determine the direction and enhance the efficiency and effectiveness of state management over the FDI sector in the coming time.

Over 30 years of innovation, in Vietnam's achievements regarding socio-economic development there is a significant contribution from FDI with the realized capital of about 170 billion USD, contributing to completion of market economy institution, creation of capital resource for development investment, shift of the economy’s structrure, promotion of reformation, restructuring of the economy, job creation, the State budget revenue and technological transfer, etc. Meanwhile, the development of domestic enterprises is still limited, therefore, in the coming time, we need to continue having policies to support and continue to see FDI as a part of the Vietnamese economy.

Having experienced 30 years of FDI attraction, Vietnam must review that process to consider and set criteria for assessing the effectiveness of FDI on quality, sustainability, value creation, etc. to continue promulgating more suitable policies for FDI attraction in the future. We must clearly identify whether issues with which the FDI sector has obstacles and limitation caused by institution, policies or implementation organization. If we can identify the causes, we must propose solutions and readjust to ensure a more strict management and have "filters" suitable to our FDI attraction orientation in the coming time, Minister Nguyen Chi Dung emphasized.

How to develop auxiliary enterprises and linkages between FDI and domestic enterprises is a big question and has always been raised with associations, organizations and investors. But the reality shows that standards, levels of foreign and domestic enterprises are far different. This makes it difficult for enterprises to connect. Therefore, our view is to enhance the efficiency of FDI attraction, focus on technology transferring, management level and products consumption market; to take the initiative in selecting high-tech, environmentally-friendly projects, high value-added and localization rate products, participating in the global production networks and value chains to promote restructuring of the economy, especially, mandatorily associating with domestic enterprises, etc. but more importantly, we must support and facilitate all favorable conditions for Vietnamese enterprises to develop more and more. When domestic enterprises develop and come close to standards and levels of FDI enterprises, they will automatically link themselves with each other. We have promulgated the Law on Supporting Small and Medium-size Enterprises and in the coming time, will build an Innovation Center, thereby contributing to the promotion of technology development and formulating support policies so that Vietnamese enterprises have enough conditions to grow and participate in a common playing field and connect with FDI enterprises.

Regarding the issue of mergers and acquisitions in the coming time, Minister Nguyen Chi Dung believe that it is necessary to continue creating environment and policy mechanism to encourage Vietnamese enterprises to repurchase enterprises with FDI capital. This will help domestic enterprises gain technology, innovate and upgrade technology to participate in value-added chains. In addition, we must utilize the opportunities offered by the 4.0 revolution.

Having been involved in foreign investment for 30 years and experiencing all important aspects related to the state management of foreign investment, Minister Nguyen Chi Dung has many innovative ideas on how to effectively promote the efficiency of attracting foreign investment for economic development of the country. As the head of the state administration of foreign Investment, Minister Nguyen Chi Dung expressed his thanks to all foreign investors who have invested and contributed to Vietnam’s economic - social development process. At present, the Government of Vietnam is continuing institutional reform to improve the investment environment to be more open, convenient and attractive to accompany investors, thereby, contributing to attracting more and more resources for development investment./.