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FDI Vietnam conditions

01 May, 2005 News Center 1,013

Since first promulgating a (relatively liberal) Foreign Investment Law in 1987, Vietnam has been making great efforts in attracting FDI inflows into the developing, transitional economy. Indeed, FDI has been an important part of the economic transition, business liberalization and macro-economic growth story in Vietnam over the last decade or so.

FDI companies contributed 13.3 % to the GDP, 35% to the industrial output, 23% to export volume, 25% to total state budget revenues (2001) but provided only 0.3% of overall employment. From 1988 up to 2004, Vietnam has issued 5021 licenses with total registered capital amounting to US$ 45.4 billion. So far investors from 68 different countries and economies, mainly from Asian countries, have invested in the country. In terms of economic structure, foreign investors have focused on industry accounting for 3,361 projects with total committed capital of US$ 26.37 billion, corresponding to 66.93% and 58.11% of total projects and total committed capital respectively. The tertiary sector is accounting for 19.36% of the total projects and 41.88% of the total committed capital. Agriculture, fishing and forestry share only 13.7 of the total projects and 7.49 % of total committed capital.

Key elements:

– Trade and investment promotion activities by high-ranking officials through seminars with oversea businesses.

– Positive results of the 44-point Viet Nam-Japan joint initiative over the past years.

– Effective implementation of an agreement with Singapore to promote investment in a third country, the Viet Nam-US bilateral trade agreement, other bilateral and multilateral cooperation accords.

– Further improvement of the investment environment to create a level playing field for both local and foreign investors, e.g., “one price and charge system” roadmap, Government’s incentives (financial assistance to build outside-fence electricity supply works, increasing tax deducted advertising expenses).

– The opening of international direct air routes by Viet Nam Airlines, waiver of visa for ASEAN citizens and Japanese, Korean tourists in 2004.

However, there are some constraints such as cumbersome investment making Viet Nam’s investment environment less competitive. In addition, master development plans of several branches of activities and industries (training and education sector) and protections in cement and steel industries hindered the involvement of foreign investors.

In coming years, the Government will stick to improving the investment environment and creating more favorable conditions for foreign investors. Administrative reform has been defined as a breakthrough. Under a decentralization plan, local authorities are proposed to manage their own foreign investment projects. Therefore, assessment procedures will be further simplified, and post-supervision will be carried out while investment licenses will contain more clear-cut regulations.