New generation FDI attraction strategy needed

According to Pro. Dr. Hoang Van Cuong (photo), Member of the Finance and Budget Committee of the National Assembly, Vice Rector of the National Economics University, Vietnam needs to be proactive in attracting foreign investment (FDI) and have policies to spread this capital flow for development of domestic enterprises.

Pro. Dr. Hoang Van Cuong

It is expected that there will be many working delegations of large foreign enterprises and investors in Vietnam, in your opinion, what does this mean for our country's economic development?

Recently, more than 200 leading Korean enterprises have come to Vietnam. Korea's investment market share in Vietnam is being evaluated as the highest among foreign investors. The reason is the adaptation between Korean production and management activities and Vietnam's human resources, investment environment, and market. This is also the basis for Korean investors to bring capital flows to Vietnam.

Currently, the attraction of FDI in Vietnam is not only to solve the problem of employment, but Vietnam is gradually changing its growth model, shifting the economic structure towards creating high-added value. Therefore, this requires attracting new generation foreign investment and technology transfer, thereby creating sustainable development for domestic enterprises.

We have talked a lot about the change of mindset in attracting FDI, how should this issue be viewed in the current context, Sir?

As I said above, in the past, our country needed capital and had a surplus of labour, so it wanted to have many investors in providing capital and using labour. But in the process of economic restructuring of Vietnam, the attraction of FDI must be towards technology transfer, creating linkages and value chains. Of course, we cannot “immediately” restructure but must go through foreign investors.

Therefore, to achieve the above goal, foreign investors play the role of supporting enterprises for domestic enterprises, spreading and forming a value chain. This requires FDI enterprises to produce core and high-tech stages so that domestic enterprises can become “satellites”, produce auxiliary stages and gradually transfer technology to domestic enterprises in the future.

In addition, the standard to attract FDI of Vietnam was quite simple in the past, but with the requirements of attracting new-generation FDI, there must be investors who meet the above conditions. If an FDI enterprise invests in Vietnam but does not give what they produce, or how domestic enterprises connect, it will not meet the standards and will not be the criteria for us to attract investment.

From the above issues, what do you suggest to increase the efficiency of FDI attraction?

We have a strategy to attract new generation FDI. Through summarizing FDI attraction in the old period, it was found that Vietnam only played the role of outsourcing, so there was a risk of falling into the “middle income trap”.

Moreover, many assessments suggest that Vietnam has low labour productivity. However, the low labour productivity of Vietnam is not due to the lack of hard work and lack of high skills by Vietnamese people, but the basic thing is that Vietnam is in the low-value outsourcing stage for foreign enterprises.

Therefore, the strategy to attract new generation FDI with the leading criterion is technology. FDI enterprises that have core technology, capable of creating linkages and spread for domestic enterprises will be the criteria to be selected.

Moreover, Vietnam cannot “sit and wait for” foreign investors to come, but needs to be more proactive. We need investors who can meet technology requirements and be transferred to domestic enterprises, these must be core and pillar enterprises, so we must actively invite and find them. If you only “wait” for FDI enterprises to come by themselves, you can meet good ones, and you can also attract “incorrectly”.