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REVIEW of FINANCE - Issue 4, 2022
USD 65.1 billion in 2022 and 4,774 projects, accounting for (iii) By investor capacity:
16.2% of the total capital with investment fields. Basically, + Encouraging FDI of industries/fields. It is necessary
the period 2011 - 2015 compared with the period 2016 - to classify by manufacturing and service sectors. For
2021 in terms of partners FDI investment has not changed the manufacturing sector, priority should be given to
much, traditional partners and mainly come from Asian attracting FDI into high-tech industries suitable to Viet
countries, rather than other continents (Europe, America Nam's development level, industries that use less energy
Latin…) This implies the limitation of Viet Nam in and are environmentally friendly; safe food processing
accessing quality FDI flows from development partners using a lot of domestic inputs and supporting industries
holding source technology. for priority sectors to attract investment. In the service
sector, it is advisable to attract the commercial presence
Potential Limitations
of multinational companies in Viet Nam such as the
Attracting FDI in the context of the implementation of establishment of regional representative offices, regional
FTA over the past time has experience some limitations, distribution centers, production support services
specifically: and logistics.
- The increase in FDI volume thanks to the advantages + Encouraging FDI by product: Prioritizing FDI into
of FTA does not guarantee the benefits associated with the projects that create products with high added value,
improvement of FDI quality. FDI inflows from developing energy-saving products, environmental protection
countries to invest in Viet Nam to take advantage of tax equipment, and products that use a lot of investment in
incentives in the FTA may lead to the risk of turning Viet domestic and foreign market, capital- and knowledge-
Nam into a receiving point for outdated technology. intensive products to take advantage of the FDI sector
Taking CPTPP as an examples, for high-quality FDI over the domestic enterprise sector
projects, the CPTPP only has a supporting factor, but not + Encouraging FDI according to investors' capacity:
a decisive factor for investment activities. Adjusting policies to prioritize selecting investors with
- Not fully grasping the advantages of Viet Nam's FDI sustainable business strategies, capable of using clean
attraction from joining the FTA while Viet Nam’s main technologies, and applying environmental management
competitors in trade and investment have not yet joined. measures. effective, has the potential to create linkages
Even when compared with intra-regional countries, the with the domestic business sector, especially through
competitive advantage in attracting FDI only exists in the the transfer of knowledge and clean technology to
short term (5-10 years) because the FTA is open in the domestic enterprises. The proposal is based on the social
future, more countries are allowed to negotiate to join. responsibility performance criterion (CRS) as a criterion
- Inadequacy in policies to attract investment for FDI: for investor selection.
The current laws and documents create many incentives - Regarding the work of supporting businesses to
for the FDI sector in accessing land resources, income integrate into the FTAs. Supporting businesses to improve
tax and import-export tax, but the FDI sector has not their competitiveness to realize opportunities from the
yet produced a positive effect commensurate with the FTA implementation plan of the Government as well
above incentives, but on the contrary has many negative as of many ministries, sectors and localities. Therefore,
effects on the host country's economy such as tax evasion, it is necessary to focus on improving the priority areas
transfer pricing, loss of budget revenue and unfair and objects of support, such as: support to improve the
competition with domestic industry. This goes against competitiveness of enterprises: support programs need to
Viet Nam's goal when joining the new FTAs to receive the focus on priority issues of enterprises, improve product
new generation of FDI with technology and create added quality, training management skills for leaders and
value to replace the old generation FDI. professionals for employees.
- The numbers of businesses well understanding
about the most recent FTAs and its impact on businesses References:
are very limited. 1. Foreign Investment Department, Ministry of Planning and Investment, 2011-2022
data, www.dautunuocngoai.gov.vn.
Recommendations
2. General Statistics Office, 2011-2022 data, www.gso.gov.vn.
- Reviewing the form of tax incentives under FTA 3. Ministry of Planning and Investment (2018), Strategy and Strategic Orientation for
commitments, especially for CIT, the criteria and Attracting New Generation FDI, period 2018-2030.
conditions for the application of incentives need to be 4. Pinto M (2010), A review of FDI theories: An application for transition economies,
more selective, avoiding spreading and wasting incentives International Research Journal of Finance and Economics, Vol. 89, pp. 118 - 137.
for unnecessary projects. To ensure effectiveness, tax
incentives should focus on projects with positive spillovers Author’s information:
to the entire economy. Specifically, it is necessary to adjust Nguyen Thi Cam Giang, Bui Thi Men
incentives and investment project selection according to 4 Banking Academy
factors including (i) By industry/field; (ii) By product and Email: giangntc@hvnh.edu.vn, menbt@hvnh.edu.vn

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