FDI with the process of economic restructuring

Accordingly, selectively attract foreign investment projects, focusing on attracting large multinational companies, effectively spreading to the domestic economic sector and associated with environmental protection. Building a transparent, fair, equitable and favorable competitive environment, reducing costs related to state management and institutional risks for the business sector, especially domestic private enterprises. Promote the connection between domestic enterprises and foreign direct investment sectors.

Many opinions of economic experts believe that the essence of economic restructuring is improving the efficiency of allocation and use of resources in addition to enhancing the role and efficiency of the market in allocating and using those resources. That means, foreign direct investment (FDI) has been considered as an important resource.

For nearly 3 decades (1998-2017), FDI has been considered an important source of external force, contributing significantly to economic growth and structural transformation. Good use of this external resource will help achieve a number of goals set out for economic restructuring in the current period, such as adding a large resource of capital and technology, helping to invest in depth, creating conditions for improving labor productivity...

A review of some specific results of FDI on Vietnam's economic development over the past time to see this more clearly.

According to statistics, Vietnam's total social investment capital in the period 2011 - 2015 reached 31.8% of GDP, of which FDI has added a large source of capital to total social investment. FDI capital has maintained high growth rates over recent periods and years.

FDI is also the most dynamic development area with a GDP growth rate higher than the growth rate of the whole country. In 1995, GDP of the FDI sector increased by 14.98% while the national GDP increased by 9.54%; This rate in 2000 was equivalent to 11.44 - 6.79%; in 2005 it was 13.22 - 8.44%; in 2010 it was 8.12-6.78% and in 2014 it was 7.18-5.98%.

As of 2013, the contribution of the FDI sector to Vietnam's GDP was 7.7 percentage points higher than the world average, showing that the influence of FDI on Vietnam's economy is very large.

However, besides the positive contributions of FDI to the economy, FDI continues to pour into Vietnam at over 20 billion USD in recent years into many large-scale projects, exceeding the economy's ability to receive and manage (the annual FDI disbursement level only reaches an average of over 10 billion USD). As a result, FDI is increasingly revealing clearly the shortcomings of the economy in terms of environment, competition in the domestic market, and linkages with Vietnamese businesses. This is also the reason why the absorption of new technology, improving labor productivity... of Vietnamese enterprises from the impact of FDI is still very limited.

Faced with that situation, in order to effectively use FDI resources in restructuring the economy, the question has been raised, how is it "reasonable" to attract and use this external resource in the current period of economic restructuring?

Obviously, this is not simply a question but a difficult problem for the state's management of FDI that needs to be solved scientifically, to have an optimal answer, suitable to the current and long-term development status of the economy. Of course, this question must be solved on the basis of properly implementing the State's orientation and policies on FDI in the coming period, which is to continue to encourage FDI into Vietnam, attracting FDI to ensure effective and sustainable development of the economy, as well as ensuring security and defense...

Meaning that it is necessary to "restructure" in attracting FDI to more effectively serve the restructuring of the economy.

There is a related issue that needs to be discussed. That is planning to attract FDI;  improve state management capacity at all levels in attracting and using FDI; Handling the shortcomings of current FDI related to economic restructuring.

First, about planning to attract FDI. Although there is still no master plan on attracting FDI nationwide, FDI attraction is still carried out based on orientation, industry and regional development planning and the list of projects calling for FDI capital of localities and countries. The lack of a master plan to attract FDI has recently led to allowing FDI to invest in sensitive lands. The fact that FDI simultaneously rushed and massively invested in the same field (such as real estate in the period 1996 - 1998, in iron and steel...) caused an imbalance between supply and demand, but was slow to deploy or failed to deploy... causing a waste of resources.

Having a master plan to attract FDI also helps determine what is "reasonable" for FDI in the coming period, because having a plan takes into account the connection with other plans, ensuring FDI attraction in accordance with each stage of economic development, creating conditions for domestic enterprises to develop, and preventing potentially risky projects in the future. At that time, both foreign investment and domestic investment are guaranteed to be effective and do not waste resources from a general perspective.

In that overall plan to attract FDI, it will take into account attracting in-depth investment (not focusing on the number of projects, choosing projects that Vietnamese enterprises do not have enough capacity to implement, choosing projects with high technology, capable of helping develop specific fields and industries).

That plan also clearly defines the harmonious investment ratio between foreign partners in Vietnam, not letting any one partner dominate the FDI market in Vietnam.

That planning is also a technical barrier to limit bad projects from countries that have economic sovereignty disputes... with Vietnam.

Developing this plan will clearly help improve the efficiency of FDI resources for the economy. Hopefully, the Draft Planning Law submitted to the National Assembly this term for comments, when approved, will serve as a basis for building a master plan to attract FDI.

Second, on improving state management capacity at all levels in attracting and using FDI. Recent lessons on environmental incidents from FDI projects have fully revealed state management capacity at all levels in attracting and managing FDI, from investment promotion, investment licensing appraisal, to post-licensing management supervision of FDI enterprises.

To avoid the loss of resources spent to overcome environmental incidents from the state and social budgets, there is nothing more than to objectively and scientifically "dissect" a few environmental incidents from FDI enterprises to find loopholes in state management, in order to fix them and not let them recur in attracting FDI in the coming period. This is also a specific solution to improve the efficiency of using FDI resources in the process of restructuring the economy.

Improving professional capacity and increasing responsibility of FDI management staff is also one of the specific solutions that contribute to avoiding wasting resources to serve economic restructuring in the current period.

Third, regarding handling current inadequacies of FDI, mainly inadequacies that waste resources for economic development of licensed FDI projects.

Specifically, there needs to be an immediate solution for "suspended" FDI projects that cannot be deployed or are behind schedule, especially for large-scale projects that use a lot of land; Must stop operations for projects that do not have environmental protection solutions; Encourage and promote investment in the form of joint venture companies between Vietnamese and foreign enterprises. Currently, investment in the form of 100% foreign capital is the majority in Vietnam, accounting for over 70% of the total investment projects.

In short, handling these shortcomings will help FDI flow flow more freely, help increase external resources, use related resources better and more effectively, help improve labor productivity of Vietnamese enterprises, serving the current economic restructuring process.