Experts urge closer scrutiny to ensure high quality FDI

CA - The potential risks of foreign direct-invested projects, such as environmental impact, should be seriously examined before local officials hand out licences, economists have warned.

“Only the most effective investment projects should be selected,” said Tran Dinh Thien, director of the Institute for Economics, in a recent interview with the Vietnam Economic Times.

Projects that advance sustainable growth include those that are high quality, employ advanced technology, and have the capacity to help other industrial sectors develop, according to Thien and other experts who were interviewed by the newspaper.

In the last two years, FDI capital has increased dramatically, with US$60.3 billion in 2008, triple the amount in 2007.

In 2009, the figure dropped to $21 billion because of the global financial crisis, but the Ministry of Planning and Investment estimates that this year it will increase by 10 per cent.

Examining the potential risks of projects and being more selective about projects would not weaken investors’ desire to pour money into Viet Nam, an official of the ministry said.

Many potential problems, including the trade deficit, environmental issues, money laundering, and overdevelopment in one or more sectors, would all have to be considered more carefully before licensing decisions are made.

FDI could possibly be an advantageous channel for money laundering because of the loose management of money flows,and the high percentage of cash used in transactions in Viet Nam, according to a report by HCM City Development Institute researchers Nguyen Thi Lien Hoa, Tran Phuong Hong Hanh and Bui Anh Chinh.

“Unethical organisations might engage in money laundering activities by investing in the country under the form of a 100 per cent foreign-owned company,” the report said.

Dr To Trung Thanh of National Economics University said many projects continued to overexploit natural resources and use outdated technology.

“Viet Nam could be a destination for technology waste if we continue to import old equipment,” Thanh said. We need more high-tech projects.”

Experts said there was a great deal of FDI in real estate, which is a sector that does not create many jobs, facilitate exports or technology transfer, or improve the competitive capacity of the country.

Real estate FDI represented 45.5 per cent of total FDI in 2007 and in 2008, but fell to 35.4 per cent in 2009.