However, there are still snags in FDI attraction that need to be ironed out. Excerpts from an interview with associate professor and Doctor Tran Dinh Thien, deputy head of the Vietnam Economics Institute.

VOV: What are the main problems with FDI attraction to Vietnam?
Mr Thien: In recent times, there has been a sudden change in FDI attraction. This can be seen in facts and figures: FDI keeps increasing with many major projects worth billions of US dollars each. Capital disbursement is expected to reach around US$12 billion this year. FDI projects mainly focus on the fields of oil and gas exploitation, steel refining, real estate, and services. Some provinces, which found it difficult to attract FDI in the past like Ninh Thuan and Ha Tinh, are now bustling with a boom in large-scale FDI projects, even at this time of the year when the world is feeling the pains of the financial crisis and Vietnam is also facing a number of economic difficulties.

VOV: Why does Vietnam still attract many foreign investors when its national economy is slowing down?
Mr Thien: Foreign investors are looking forward to long-term benefits, instead of short term ones. They consider Vietnam as a destination to exploit natural resources, cheap labour and transfer low technologies and environment pollution. Therefore, Vietnam should not be content with the increasing inflow of FDI.

VOV: Is it time for Vietnam to make a good choice of investment projects?
Mr Thien: Currently, with more FDI flowing into the country, Vietnam needs to choose suitable projects in line with its long-term development strategy. Vietnam is no longer hungry for capital. The most important thing is to keep high-tech projects running on the right track.

VOV: Do you think Vietnam has not used FDI capital effectively?
Mr Thien: Over the past two years, there have been some obstacles in the way of FDI attraction, such as infrastructure, transport and ports. How much capital the country needs in projects to ensure stable energy supplies is still an open question in relation to the capacity of each locality, urban development planning and macro-economic management.

CityGroup reported that Vietnam’s capital disbursement is not on a par with its foreign investment, which is expected to reach US$12 billion by the end of this year? What is your opinion?

US$12 billion in investment is an added bonus to the country in the current situation. However, Vietnam should not pay too much attention to the amount of foreign investment. The crux of the matter is how to use investment capital effectively. If the investors are not provided with sufficient conditions, they will leave the country and it will be very difficult to lure them back to Vietnam. When conditions are not as good, excessive foreign investment may become counterproductive to domestic investors.

VOV: A number of projects have been conducted without regard to effectiveness as many provinces and cities are simply focused on attracting more FDI capital. Do you think this is due to decentralization of investments in the localities?
Mr Thien: Every locality has their own reasons for selecting FDI projects. The bottom line is that they need a good master plan to decide if they are fully capable of handling projects. Local authorities often complain that the master plan is not specific enough.

VOV: Do you think the focus of nearly 50 percent of the total FDI capital on real estate is putting the national economy at risk?
Mr Thien: This is an alarming figure. FDI in Vietnam tends to flow into such fields as real estate. This fact should be examined from different angles. On the one hand, there are certain areas where foreign investors do better than their local partners. On the other hand, we must see that investing too much in golf courses could bring disaster to farmers and damage the environment.

VOV: Is there any solution to the problem?
Mr Thien: Currently, we cannot rely entirely on free market operations. State intervention is necessary. We also need to provide transparent information, consult people and build a competent analysing method.

VOV: What do you think about the trend for FDI in 2009?
Mr Thien: The attraction of FDI may face more difficulties in 2009 due to the effects of the global crisis. I think the flow of FDI capital into Vietnam in 2009 will not be as high as in 2008. Nevertheless, efforts to ensure macro-stability and control inflation can help to weather the downturn./.