Vietnam Should Be Cautious of Massive FDI Inflow: Economist

CA - Vietnam should be cautious of a huge influx of foreign investors whose projects are largely focused on the national natural resource exploitation to maximize their profits, said Head of Vietnam Institute of Economics Tran Dinh Thien.

Most of FDI projects in Vietnam are using natural resources such as steel, iron, cement, realty and tourism, seriously affecting the environment; while only a modest number of FDI capital is poured into hi-tech sector.

“Foreign media hails Vietnam as an ‘investment paradise’ for its impressive pledged FDI figures. However, we should look into the truth behind such achievements”, the VietnamNet online newspaper reported Thursday, citing Thien.

Foreign investors are estimated to disburse $47 billion in FDI in Vietnam between 2001 and 2009, accounting for just one-third of the country’s total registered FDI of $124 billion during the period.

Additionally, up to 70%-75% of export revenues by Vietnam-based FDI firms are sourced from crude minerals and outsourcing products, he noted.

Thien cited another example that as much as over half of FDI companies in Vietnam have dodged local laws to report losses for years as a trick for tax invasion. Meanwhile, they are still offered with incentives which should be given to domestic businesses.

Lots of foreign firms pledged to invest huge capitals into projects in Vietnam just for the purpose of “keeping land”, and then push them into “stagnant” situation such as a $4.15-billion Dragon Beach project by the U.S.’s Tano Capital LLC and Global C&D Inc in Quang Nam province.

The massive but low-quality FDI wave is partially attributed to the so-called “racing for achievements” manner of Vietnamese localities which are trying to lure foreign investors at any cost on regardless of the national interests.

Several steel projects have been approved for Vung Ang Economic Zone in Ha Tinh province.

The similar situation was also reported for Ba Ria Vung Tau province where has a lot of tourism potentials. Local authorities have still licensed up to 18 steel projects though capacity of steel factories in Vietnam has surpassed domestic consumption demand.

Vietnam should pay more attention to develop supporting industry to boost domestic firms’ strength, the economist said, highlighting that this area is an opportunity for foreign companies to make profits in the nation.

Thien emphasized that the government should do more to protect Vietnamese enterprises which are often losers on their own playing ground.