Founder's insights

Improving Institutions and the Business Environment

Kenneth Atkinson OBE
By:

Whilst much has been spoken in the past on the need to improve institutions and the business environment, in order to attract and retain foreign direct investment, progress has been slow. However, it would seem that the Government is now paying more attention to this in the light of a recent report[1], which highlighted “the number of projects with advanced and modern technology and European technology only accounted for approx. 5%...”

 

FDI enterprises currently account for 55% of industrial production and 75% of exports[2] but will relatively low levels of investment in modern and efficient technology the spillover effect on productivity and efficiency have not been high. Vietnam has also suffered because of the constant relatively high increases in the minimum wage with a lower percentage increase in productivity although this has started to change in recent years.

 

The report also highlighted that the limitations in attracting advanced technology were primarily caused by the fact that institutions and policies on FDI had not kept pace with development requirements. The EU Vietnam FTA was one of the first if not the first FTA to incorporate the requirements for Institutional reform and measures to level the playing field and already we have seen confidence shown by European investors such as Leggo, Pandora and Ecco who have all made significant investment commitments using advanced technology. However, it is early days and other companies will be eagerly watching for changes and improvements in both the institutions and FDI policies.

 

Changes recommended by VAFIE include strengthening the state management of FDI from the stage of project promotion through the process to inspection and supervision of implementation[3]. Also under discussion is a set of evaluation criteria including specific economic, technological, and social indicators serving as a basis for foreign investors to self score prior to project screening by local authorities before issuing investment licenses.

 

To support these suggestions and recommendations is the continuing drive for transparency and governance and the recent announcement of the setting up of provincial Steering Committees on Anti-corruption

 

Of course the devil as always is in the detail but it is encouraging that these discussions are taking place openly with Government.

 

Kenneth M Atkinson OBE

Founder and Senior Adviser

Grant Thornton Vietnam 

---

[1] FDI Annual Report 2021 by Investment Research Consultancy Company JSC.

[2] Association of Foreign Investment Enterprises (VAFIE) 2021 Report

[3] VN News Monday June 13th.

 

 

Related articles

View more