Workers produce electronic components and accessories at the Mtex Vietnam factory in HCM City. — VNA/VNS Photo Thanh Vu

HA NOI (Biz Hub) — Viet Nam should drastically change its foreign investment policy, ensuring a more even distribution of funds and strengthening its focus on high-tech and environmentally-friendly projects, experts say.

A Viet Nam News Agency (VNA) report yesterday cited several experts as saying the nation's foreign direct investment (FDI) policy should also ensure added value for domestic products and services.

The report noted that as a global economic recovery begins to take shape, the Government and localities nation-wide are trying to offer greater incentives for FDI capital.

It said FDI has played an important role in Viet Nam's economic development,recording impressive achievements even during the economic turmoil that began around six years ago.

According to the Ministry of Planning and Investment, as of late 2013, some 100 countries and territories had invested in 15,300 projects with a total registered capital of over US$223 billion.

The VNA report quoted faculty of the HCM City University of Economics as saying foreign investment has become an important additional resource for the country over the last 25 years.

It said the FDI sector has seen the highest growth compared to other economic sectors, contributing 20 per cent to the country's GDP, taking technology to higher levels, improving the quality of human resources and generating jobs.

It also quoted Le Manh Ha, Vice Chairman of the HCM City People's Committee, as saying that since the beginning of this year, the city has enjoyed a nine-fold year-on-year increase in FDI inflow.

Ha said further that neighbouring cities and provinces like Dong Nai, Binh Duong and Ba Ria – Vung Tau, have also reaped success in attracting FDI.

Members of the Central Economic Committee as well as academics with the HCM City Economics University have stressed the importance of bringing about "drastic changes" in attracting foreign investment, mainly through a clear preference for advanced technology and environmentally-friendly projects, the report said.

Dr Hoang Xuan Hoa of the Central Economic Committee said that FDI resources should be allocated in such a way that they spur economic development in all cities and provinces.

Incentives galore

Provinces in the southern region have taken the lead in offering many incentives to achieve their FDI goals for 2014 and coming years, the VNA report said.

Bo Ngoc Thu, director of the provincial Department of Planning and Investment, said that to reach its goal of attracting $900 million in FDI this year, of Dong Nai has instituted several preferential policies.

FDI businesses will enjoy a 22 per cent corporate income tax for both new projects and project expansions, she said. They will also benefit from a four-year tax exemption and a 50 per cent reduction for the following nine years. Businesses operating in industrial parks will also enjoy a tax rate of 22 per cent, as opposed to the usual 25 per cent.

Thu said Dong Nai has also issued policies to assist small and medium-sized FDI enterprises, with administrative procedures eased considerably for prrojects with an investment of less than VND100 billion ($4.7 million) that employ at least 300 people.

Meanwhile, HCM City has invested in an industrial park to attract Japanese businesses. The 100ha Vie-Pan Techno Park is located in the Hiep Phuoc Industrial Park.

Ha, vice chairman of the HCM City People's Committee, said the city enjoys several advantages including location, a large number of qualified employees, excellent living conditions for investors, and improved social infrastructure facilities.

To attract foreign investors, Binh Duong Province has built a many industrial parks with international standard infrastructure, local officials say. The province is also focusing on training qualified workers and enhancing services to meet investor requirements. Binh Duong has set a target of attracting $1 billion in FDI in 2014.

Further reforms

Hung So, General Secretary of the Korean Chamber of Commerce in Viet Nam, said investors from his country believe in the nation's potential and want to expand their business presence here, especially in retail and distribution.

However, they are hoping for further reforms in investment policies, he said.

Both experts and investors say that administrative procedures and inappropriate policies have hindered Viet Nam's ability to attract foreign investment, the VNA report said.

It noted that in a recent dialogue with foreign investors, Minister of Planning and Investment Bui Quang Vinh said that efforts are on to simplify the issuance of investment certificates, including exemptions for projects that do not use large land areas or cause high levels of environmental pollution.

Vinh also said that the corporate income tax policy will be changed gradually. From January 1, 2016, the tax will fall to 20 per cent from 25 per cent. For some priority industries, it will be further reduced to 17 per cent, he said.

Hoang Thi Tu of the Central Economic Committee said consensus has to be reached on tax and investment policies towards helping raise national competitiveness in attracting foreign investment.

The Internet should be used to highlight the investment attractions of Viet Nam in general and its different localities, said Prof Nguyen Mai, chairman of the Foreign Investment Business Association.

Mai also said that the Internet should provide information that investors need to make decisions. — VNS