Workers check electronic devices made at South Korea-invested Dae Yang Hanoi Co in Dong Dinh Industrial Park, Bac Giang Province. — VNA/VNS Photo The Dai

HA NOI (Biz Hub) — The capital city will continue to hasten administrative reforms in the next few years to smooth the path of foreign investors, including those from the European Union countries.

Nguyen The Thao, chairman of the municipal People's Committee, made this announcement during yesterday's meeting with EU businesses that operate in Viet Nam.

In recent years, the city has paid attention to implementing transparent policies and further integrating with the global economy, Thao said. He added that the city had established bilateral ties with more than 100 capitals and cities worldwide.

Many foreign investors, including European ones, have registered to make large-scale investments in the city, capitalising on its significant growth, he noted.

Statistics show that the city has, to date, attracted 2,727 foreign-investment projects, with a total registered capital of approximately US$21.9 billion. Most of these projects are for the real estate trading, communication, processing and manufacturing industries as well as entertainment.

As for EU investments, Ha Noi is now home to 290 EU-invested projects, worth $2.6 billion. Among the 19 EU countries that are investing in the city, France has taken the lead with 68 projects, followed by Germany with 44 and Denmark with 42.

During the 2012-13 period, EU businesses in the city have posted a combined revenue of more than VND25.7 trillion ($1.22 billion) and contributed VND1.78 trillion ($85 million) to the state budget.

Thao remarked that the city will give priority to attracting foreign investments in sectors in which EU businesses are strong, such as high-tech and support industries, finance and banking as well as health care and education.

Flight of capital

For the last 28 years, foreign-directed invested (FDI) enterprises have significantly contributed to the Vietnamese economy, but there have been problems as well.

In the report, "The recovery of the economy: opportunities and challenges", a group of researchers from the General Statistics Office have noted that a lot of money has flown out of the country due to FDI.

FDI enterprises in turn have transferred their profits back to their home country.

Along with GDP growth, attracting FDI to the country has been important to the economy, as many FDI enterprises have benefited from preferential policies like land rent, taxes and capital.

Viet Nam has received little from technology, human resources and tax collections from FDI, the report said.

GDP is now calculated by accounting for the value of all industries and import taxes.

For example, if one FDI enterprise has been operating in Viet Nam for over one year, all value of the company is calculated into the national GDP. But its profit is transferred back to their country.

This means the GDP cannot reflect the real economy.

The FDI area is plagued with a number of problems, including price-transfer activities, the domination of the market in animal food and retail services, environmental pollution, out-of-date technology imports, and human resources disputes.

"For over one fourth of a century, FDI has mainly contributed to the development of the country as well as many localities like HCM City, Ha Noi, southern provinces of Binh Duong, Dong Nai, Vung Tau, and northern provinces of Vinh Phuc and Bac Ninh," professor and Dr. Nguyen Mai, chairman of the Foreign Investment Association, told the Thoi bao Kinh te Viet Nam (Viet Nam Economic Times) newspaper.

He cited Vinh Phuc and Bac Ninh provinces as examples.

FDI enterprises in Vinh Phuc Province increased State budget collections from VND100 billion ($4.7 million) in 1992 to VND15 trillion ($714 million) in 2012.

Since 2007, Bac Ninh has successfully developed industrial parks with a total of US$4 billion from FDI enterprises, including several high-tech projects of Samsung, Nokia and Canon.

GDP per capita in Bac Ninh has reached $3,200, double compared with the national average.

"The right answer is not limiting FDI enterprises' activities. Co-operation between FDI and local enterprises in the support industry is needed and has potential," Mai said.

There are 12,000 FDI enterprises doing business in Viet Nam. — VNS