New
strategies to attract foreign direct investment (FDI) must strengthen linkages
with domestic enterprises as a lacuna that cannot be ignored anymore, experts
say.They say that even as the rising FDI influx over the last few
decades increases its contribution to the national economy, it has performed
below expectations in promoting the domestic economic sector. Đỗ Nhất Hoàng, director of the Việt Nam Foreign Investment
Agency under the Ministry of Planning and Investment, noted that FDI could hit
a ten-year high of US$35 billion in registered capital this year with
disbursement estimated at $17 billion – a record high.The major
role that FDI plays in the Vietnamese economy can be seen in the fact that it
accounts for 55 per cent of industrial production,70 per cent of export
revenue, 18 per cent of budget collection and 3.7 million direct jobs.
However, the FDI sector’s role in promoting the domestic economic sector has
fallen far short of expectations, said Nguyễn
Mại, Chairman of Việt Nam Association of
Foreign Invested Enterprises.Vietnamese
firms still have very modest positions in the global supply chain, he said.For
example, in textiles and garments, domestic firms continued to participate
mainly in low-added value stages, despite the sector’s exports reaching $30
billion in 2016, accounting for four per cent of the global turnover.
Mại said a similar story was
repeated in mobile phones production.Nguyễn Mạnh
Linh, an official with the Ministry of Industry and Trade, said that very few
domestic firms were able to become parts suppliers to FDI enterprises, and they
still failed to meet the latter’s strict requirements.Besides,
Linh said, many localities competed with each other in attracting FDI by
offering greater incentives, hoping to create jobs and boost local GDP. But
they paid little attention to FDI quality and technology transfer, he added.
This situation is a cause for concern, experts say, adding that it has become
critical and imperative that Việt
Nam comes up with an FDI strategy that directs the inflow into domestic
enterprises.Mại
said FDI quality was the most important factor and its impact on the domestic
enterprises was an indicator.Lương Văn Khôi, Director of the National Centre for Socioeconomic
Information and Forecasting, said it was necessary to impose technology
transfer and local procurement requirements on FDI enterprises in Việt Nam.
Experience
from other countries show that incentives provided to FDI companies should be
halted if they did not promote technology transfer or strengthen linkage with
domestic firms, Khôi said.At the same time, Khôi added, Việt Nam needed an effective
strategy for developing its spare parts industry.FDI enterprises
should also have strategies to connect with domestic firms while local firms should
actively enhance their competitiveness to meet requirements of FDI companies.Hence,
along with a new five-year (2018-23) FDI attraction in the context of Industry
4.0, Việt Nam should also
develop a law on building a strong support industry, the experts said.
Source: Vietnam News, Vietnam Friday, 12 January 2018