People work at an automation factory in Saigon Hi-Tech Park, HCM City. This city is now home to 7,700 FDI projects worth US$44.87 billion. — VNA/VNS Photo Tien Luc
For the last 30 years, foreign direct investment (FDI) has significantly contributed to HCM City’s economic-socio achievements. But how to continue attracting FDI and mitigating the problems related to the sector are moot questions for the city.
Since the Law on Foreign Investment came into effect in 1988, HCM City has been the country’s leading destination for FDI. According to the latest report from the city’s People’s Committee, there are now 7,700 FDI projects worth US$44.87 billion, or 14 per cent of the total FDI in Viet Nam.
Nguyen Thanh Phong, chairman of the municipal People’s Committee, said: “The city highly appreciates important contributions by foreign businesses to its socio-economic development.”
In 1995 HCM City had accounted for 11.3 per cent of the country’s gross domestic product (GDP), but last year the figure had risen to 22 per cent. Meanwhile, foreign companies had accounted for 8.8 per cent of the city’s exports while now it is 56 per cent.
“FDI has played an important role in restructuring the [city] economy, creating modern production, distribution and consumption systems and creating 270,000 direct jobs and millions of indirect ones,” Phong said.
“The labour structure has been changed from manual work with low incomes to skilled work and high incomes.
Without FDI, without international integration, there would have been no pressure to reform and domestic enterprises could not have developed.”
Foreign investment is now focused on property, wholesale and retail, science and technology, and tourism services. Property in fact accounts for 40 per cent of FDI this year.
Improving the quality of investment by reducing labour-intensive projects and focusing on technology-based ones has been made a priority.
Thanks to its good geographic location, stable socio- economy, promising market, well developed transport infrastructure system with air links, ports and logistics, HCM City has managed to attract foreign investment.
Besides, the city is a national economic, science and technology and high-quality human resource training hub.
“Healthcare, insurance, education, and urban development are good enough for investors to come and work,” Tin Tuc (News) newspaper quoted Tran Xuan Dieu, marketing manager of German-owned Digi-Tex company, as saying.
“We were able to recruit a huge number of IT staff in a very short time for our projects and their skill along with enthusiasm have helped us reduce the length of projects,” Olga Khamilova, marketing director of Swiss Post Solution Viet Nam, said.
Su Ngoc Anh, director of the city Department of Planning and Investment, said: “A high-growth economy, improved investment environment and reformed administrative procedures are the main reasons the city attracts investors.
“Besides, it has paid special attention to investment promotion and helps investors deal with paper work.
“The city has given priority to science and technology, tourism, improving the investment environment, and creating a fair and competitive environment for domestic and foreign businesses.”
It can be seen that foreign investors come to Viet Nam mainly for the incentives offered by the Government and cheap human resources.
Phong was critical about the low rate of technology transfer between foreign companies and their local counterparts at a meeting last April.
“Foreign investors are mainly focusing on the real estate market and it accounts for over 40 per cent of the total investment and we would like to change the situation,” he said.
Chu Tien Dung, chairman of the HCM City Business Association, said however that Vietnamese businesses are not fully prepared yet for new technology.
“Our FDI attraction policy is still at the ‘welcome’ level rather than imposing on investors the condition they should transfer technology and help domestic enterprises develop.
“At the national level, Viet Nam does not have a master plan to promote connectivity between foreign and domestic businesses. The number of projects involving technology transfer is very low.”
Abuse of transfer pricing and pollution are two other worries caused by foreign-invested enterprises.
Le Hoai Quoc, head of the Sai Gon High-Tech Park’s management, said: “FDI attraction policy must be tightened in the near future and foreign investors must pledge to develop a local supply chain, which would boost technology transfer.
“Each industry should identify its supply chain, production capability and participation of local enterprises in the chain. From that, priority fields should be chosen for attracting FDI.”
He said authorities must give priority to FDI projects that complement the economy or play an important role in developing the supply chain, only allowing them in areas where domestic enterprises do not have the capability so that there is less pressure from foreign companies on their domestic rivals.
“This way, we can easily promote connectivity between FDI and domestic enterprises to build a supply chain.”
Dr Huynh Thanh Dien of Nguyen Tat Thanh University pointed out that to create connectivity between foreign-invested and local companies, the Government should have policies that persuade the former to develop their supply network by involving small and medium-sized enterprises (SMEs).
“At the same time, the Government should help local SMEs improve their management to international standards with regard to quality, markets, technology, and human resources in order to connect with foreign-owned enterprises and join international supply chains.”
Phan Chanh Duong, former deputy director of the Tan Thuan Industrial Development Company, who has 30 years of experience in soliciting FDI, stressed: “If we want to make FDI promote local production through technology transfer, the Government must have clear regulations spelling out investors’ responsibilities and penalties.” — VNS