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Investment Policy Review of Viet Nam

UNCTAD/PRESS/IN/2009/002
10 February 2009

Geneva, 11 February 2009 - Viet Nam should widen the scope of its efforts to promote and attract foreign direct investment (FDI) to the services sectors in order to continue on its fast development track, UNCTAD recommends in its Investment Policy Review . This study was presented in Geneva on 9 February 2009 during a working session with Deputy Prime Minister Mr. Hoang Trung Hai, Vice-Minister of Planning and Investment Mr. Nguyen Chi Dzung, and Vice-Minister of Industry and Trade Mr. Do Huu Hao.

This session came after an informal round-table meeting with investors that facilitated a direct dialogue between the Deputy Prime Minister, the members of the Vietnamese delegation, and executives from about 20 companies, including Accor, Alstom, Holcim and Nestlé.

As pointed out in the Investment Policy Review, Viet Nam has undergone an extraordinary economic transformation since it began its transition towards a market economy in 1986 under the "Doi Moi" (renovation) process. The decision to allow private enterprise, the opening of the economy to trade and foreign investment, as well as other structural reforms, fostered industrialization and wealth creation. Poverty plagued more than 60 per cent of the population in 1986, but less than 20 per cent of Viet Nam´s 84 million people were living below the poverty line in 2004.

While most of the credit for the transformation goes to the people of Viet Nam, foreign direct investment has made a very strong contribution to the country´s development, by creating jobs, transferring skills and know-how, providing capital and technology, and making the economy more diversified and resilient to shocks. When asked by a representative from Burundi for Viet Nam´s recipe for success, the Deputy Prime Minister cited three key factors: the people´s energy and will to develop, Viet Nam´s commitment to integrate into the world economy, and the country´s commitment to education and the development of skills.

The Acting Deputy Secretary-General of UNCTAD, Ms. Lakshmi Puri, speaking on behalf of Secretary-General Mr. Supachai Panitchpakdi, also warned that, in the face of the world economic crisis, Viet Nam should rely more heavily on domestic demand to stimulate growth, so that it is less dependant on exporting in order to fuel economic activity.

The Investment Policy Review (http://www.unctad.org/ipr) makes a thorough assessment of investment regulations in Viet Nam. It provides concrete recommendations on what the Government could do to build on the achievements of the past decades, to pursue further reforms to the investment climate, and to attract higher levels of beneficial foreign direct investment. As indicated by the Singaporean ambassador during the meeting, a favourable investment climate is always a work-in-progress that needs constant improvements. This remark is particularly true in the context of the current world recession, which will imply a sharp fall in global flows of foreign direct investment.

In order for Viet Nam to build on the achievements of the past 20 years, the Investment Policy Review proposes many concrete recommendations on how to pursue further reforms to the investment climate. These were presented around six main axes. Firstly, UNCTAD encourages Viet Nam to promote FDI in new areas of its economy, particularly the services sectors. Viet Nam has been encouraged in that direction by partner countries such as Japan, Singapore and the United States. Secondly, Viet Nam should adopt a less intrusive approach to investment regulation and reduce the administrative burden. Thirdly, it was pointed out that potential constraints on sustained growth such as the availability and quality of infrastructure and skilled workers need to be addressed vigorously.

Fourthly, it was stressed that fair and equitable treatment between commercially oriented State-owned enterprises and private companies was crucial, for reasons of effectiveness and competitiveness. Fifthly, simplification of the tax system and a review of the fiscal incentives to investment were encouraged. Lastly, UNCTAD´s report highlighted that it is essential both to absorb the reforms that have recently been adopted and to ensure their coherent application throughout Viet Nam´s 64 provinces.

Participants from private companies pointed out that Viet Nam that the country competes globally, and against its partner countries in ASEAN, to attract FDI, and that it needs to continue improving its business climate, particularly in the current context of global financial and economic crisis.

Completed in 23 countries, UNCTAD Investment Policy Reviews provide an objective evaluation of a country´s legal, regulatory and institutional framework for FDI, with a view to attracting increased foreign and direct investment to the country and maximizing the benefits from it.




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