New Regulation to Improve FDI Quality in Vietnam

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Vietnam determined to improve the quality of foreign direct investment

Oct. 7 – Over the last few years, Vietnam has emerged as an important destination to invest in for foreign companies. In 2009, the government issued a resolution titled Decision 129/2009/QD-TTg (“Decision”) aimed at attracting and managing FDI. The Decision’s goal was to build and complete a system of comprehensive, specific and uniform mechanisms and policies on land, finance, investment capital, human resources, science and technology to promote investment in, and ensure the achievement of the set targets for, natural resource and environmental protection and sustainable development. However the Decision didn’t reach the goal.

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“Many licensed projects were not appropriate, especially in the golf course development, steel, forestry and mining sectors. Many projects were not carefully appraised in terms of technologies, environment impact and labor mobilization, resulting in poor quality,” said Prime Minister Nguyen Tan Dung.

So, in response, Prime Minister Dung released Directive 1617/CT-TTg (“Directive”) last week. The new regulation aims to intensify and regulate the management of foreign direct investment in Vietnam, and particularly the Vietnamese government’s ambition is to improve the quality and encourage projects to apply state-of-the-art and environmentally-friendly technologies.

According to the Directive, new FDI projects must efficiently utilize natural resources, strengthen relationships with local companies, and invest in supporting industries, and high tech industries. Moreover, local authorities don’t have to concede investment certificates to energy and natural resource-incentive projects as well as the ones which use outdated technology and can pollute the environment.

Vietnam attracts an important number of foreign investors, but the majority of them invest in some form of low-end manufacturing while, according to recent research by the Vietnam Chamber of Commerce and Industry and the United States Agency for International Development, only some 13.5 percent of FDI is focused on high-tech industries.

The Directive will change the country’s FDI policy because the Vietnamese government wants to remove the poor quality projects. Furthermore, the Directive assigns a significance to the Ministry of Planning and Investment. The ministry will have to work and cooperate with other ministries such as the ministries of Industry and Trade, Finance, Construction and Natural Resources and Environment, to promote FDI investment for the next 20 years.

The Directive and other new regulations, such as Decision No.12/2011/QT-TTg on favorable policies for supporting industries, is a part of the new policy for the Vietnamese government that aims to create a balanced and high-level of development in the country.

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