Attracting FDI in an Economic Recession
Among those who retain a rosy outlook are Professor and Doctor of Science, Nguyen Mai, former deputy chairman of the State Commission for Cooperation and Investment and the head of the Senior Advisor Group of the Post-WTO Admission Project. He is of the belief that Vietnam will continue to be an attractive market for investors who seek medium or long-term investment potential. Investors nowadays are more cautious in their investment decisions and they are taking into consideration the time that it will likely take to implement their projects. The Vietnamese Government has been urged to pay due attention to this matter.
Taking advantage of new opportunities
While a number of opportunities have evaporated in the last six months, a number of business activities continue to hold potential. When economies worldwide were shrinking and oil prices were high, investors who invested in oil when the price was low and sold before the price dropped made billions of dollars. They will remember their profit taking when considering future investment in oil exporting countries, countries like Vietnam. Investors from the Middle East, for example, have shown an interest in partaking in large-scale projects in Vietnam. Such new opportunities would counter the negative affect of FDI projects that have been registered but are not being implemented for reasons which include lack of capital. To attract such investment, investment promotion needs to be stepped up and project evaluation and the licensing process must be speeded up.
The same old needs: quality and efficiency
In the interest of economic, military and social security, the government has devolved more power to local branches of government and industrial zone and economic zone authorities. The general public is openly questioning why so many golf courses, steel and cement production facilities and seaport and airport construction projects have been licensed recently, many not called for in any planning scheme. Can such projects be profitable, or beneficial to the general public, at a time when all economists expect a lengthy period of contraction? While Vietnam does have human resource potential and substantial amounts of natural resources, it is by no means a rich country. When devolving more power to local government, the central government would be wise to take a close look at these regional governments’ plans and monitor closely the spending of the newly available capital to see to it that local governments will channel these funds to projects that will be in the nation’s best interest.
It’s being suggested that the whole process of attracting foreign direct investment be reviewed and adjusted. A late comer to industrialization, Vietnam should attempt to avoid the mistakes that have already been made by other countries. The objective should be to attract investment into what at the time is considered be suitable areas and fields. That would lead to sustainable growth.
Making investors happy
State organizations and local governments should at this time take another look at those investment projects which they have licensed. An effort should be made to find out as much as possible about investors, particularly foreign investors. At any given time there are projects that appear likely to go forward on schedule, those which will require more time or wish to cut back in size, and those which seemingly will not be implemented. Certain things could be done that would please investors. Things like tax holidays and other incentives might inspire project implementation. When after a period of time FDI projects are not implemented, those licenses should be revoked to put the land being withheld back into circulation.
The ability of state organizations and local governments is revealed at times like this, when the country is slipping into a quite difficult period. As always, strong and consistent reform is needed. If governmental management could be improved, the country could leap forward and experience sustainable growth.
In turbulent economic times it is particularly beneficial to be able to track economic swings and have an ability to forecast trends. This ability is sorely needed by Vietnamese managers. When reasonable forecasts can be made, appropriate new development plans can be made by central planners. If anyone knew beforehand, the aftereffects of the US financial crisis - which include the global economic recession - could also have been anticipated.
