Improving business environment: from commitment to action

Since hitting a record high of US$71.72 billion in 2008, FDI inflows fell to US$32.1 billion in 2009, US$19.88 billion in 2010, US$15.35 billion in 2011 and US$16.3 billion in 2012.

The decline is attributable to the impact of the global economic downturn and Vietnam’s policy to improve the quality of FDI capital disbursement.

According to United Nations statistics, the global level of FDI dropped by 18 percent in 2012 with Asian countries seeing a light decline of 9.5 percent.

China is currently the world’s second largest recipient of FDI. But rising production costs and tensions with Japan have pushed foreign investors - particularly Japanese companies - towards ASEAN countries. The level of FDI in China and those countries is now almost the same.

Against all odds, Vietnam should seize this opportunity to gain the upper hand over regional rivals like Thailand, Indonesia, and Myanmar.

Brian O’Reilly, Vice President of the Australian Chamber of Commerce (AuCham) in Vietnam, says Australian businesses still find it more difficult to operate in Vietnam than in other ASEAN countries. Not a few investors have more than once complained about the legal system, infrastructure, human resources, and administrative procedures.

A representative of the Republic of Korea Chamber of Commerce (KorCham) says that labour costs in Vietnam are higher than in Myanmar and human resources are less qualified than in Indonesia and Thailand.

He cites the slow approval for important projects and incomplete infrastructure as reasons for significant losses suffered by KorCham investors.

For instance, a Korean business was granted a licence to build a major industrial zone in 2007, but its project has not yet got off the ground.

KorCham hopes the Government will build up the trust of foreign investors by eliminating unreasonable delays like local failure to assess the feasibility of the project.

Accelerating the assessment process will be a boon for domestic investors, too, KorCham says.

Falling FDI forecasts serve as a warning of lower FDI disbursement in the future. Compared to the high levels of FDI registered in the previous years, only US$10–11.5 billion is annually disbursed. Investment incentives should be implemented as soon as possible in order to meet foreign investors’ expectations. Commitment at multilateral forums is not enough.