Vietnam Industrial Investment Report 2011 proves practical and useful

By Dzung Trieu law firm

The Foreign Investment Agency (FIA) under the Ministry of Planning and Investment (MOPI) and the United Nations Industrial Development Organization (UNIDO) on June 27, officially released Viet Nam Industrial Investment Report 2011 (VIIR 2011) in Hanoi.

According to UNIDO experts, the report was made based on the surveys of 1,500 operating enterprises in Vietnam, of those 33 percent were small businesses, 21 percent were medium-sized businesses and 21 percent were large businesses.

In a different aspect, 57 percent of these enterprises were Foreign Direct Investment (FDI) businesses while 33 percent were non-state and 10 percent were state-owned enterprises. They were coming from Hanoi, Vinh Phuc, Bac Ninh, Hai Phong, Dong Nai, Binh Duong, Da Nang, Ba Ria-Vung Tau and Ho Chi Minh City.

According to the report, the scale of FDI businesses was often larger than domestic businesses and they also have more labor productivity. However, UNIDO expert Brian Portelli stressed that there remained restrictions in FDI businesses as they still have not improved economic vitality and used cheap labor and pay low salaries. The number of female laborers was dominant and most of them were untrained and low skilled.

FDI businesses are more export-oriented than their local counterparts, and tend to source more inputs for their production from overseas market. In the context that Vietnamese enterprises are having a global market orientation exporting beyond ASEAN countries (accounting for 66 percent) instead of a regional (eight percent) and domestic market orientation (26 percent), UNIDO suggested that they should focus more on regional market such as Thailand, Indonesia and Malaysia as ASEAN countries are more stable than the staggering US and EU markets.

The report also pointed out that firms operating in Industry Zones (IZs) often have more efficient business operations as they benefit from policies that encourage investment in the zones. IZs can also attract more enterprises with high technological content as compared to the outside localities. UNIDO representative said Vietnam's political and economic stability, labor cost and legislative environment are favorable factors that resulted in investment decisions of investors.

From those results, the report suggested nine solutions that include: assess the export-led growth model of FDI sector; focus on human capital development and skill formation initiatives; address business environment shortcomings such as infrastructure, electrical network and other unclear regulations; evaluate investment incentives and policies for IZs; develop supporting industries; facilitate more joint ventures, target FDI through mergers and acquisitions, consolidate investment promotion frame and functions of MOPI/FIA and prioritize investment promotion in inter-ministerial dialogues.

FIA Director Do Nhat Hoang said the Vietnam Industrial Investment Report 2011 had similar assessments and judgments with Vietnam's about the investment and industrial developments in the country although the report aims to monitor enterprises in nine provinces while Vietnam's survey was conducted in all cities and provinces across the country. Therefore, the report would be of great use to Vietnamese Government and relevant agencies for research and solution proposition in the future.

At the same time with the Vietnam Industrial Investment Report 2011, on June 27, 2012, FIA, MOPI, UNIDO and Vietnam Chamber of Commerce and Industry (VCCI) also made public the "Platform for Investment Monitoring and Supplier Development Phase I" with an investment of US$975,024 in two years.

The program is designed to facilitate the shift in investment promotion strategy from investment quantity to quality, measured in terms of the impact of FDI on the domestic economy while maintaining volume momentum.

The outputs under this program include a survey of foreign investors and related domestic suppliers operating in Vietnam; the Vietnam investment monitoring and management platform (VIMP) to be developed as a tool for developing investment promotion strategies; and the introduction of UNIDO's benchmarking methodology and supplier development tools, based on collaboration with VCCI./.

Chu Huynh/VEN