Foreign Direct Investment (FDI) attracting strategies in Vietnam

1. Foreign Direct Investment (FDI) Attracting
Strategies of Vietnam
PresnetedBy
GolamMohammed Bhuiyan
DeputySecretary

2. Preface
After independence and pre doi moi period (1975-86): communist
economy, Vietnam could understand by looking at the fall of
socialist economy of (central planning economy) things had to
changed; their GDP was found stagnant for 5 years(roughly around
100 billion, 1977~1981).
Doi Moi (1986) process detected weakness of central planning
economy & started reform on
* bureaucratic decision process
* Lessening incentives on SOEs, co-operatives, farmers
* voluntarism in economic planning &
* GRADUAL movement to market economy.
* Emphasis given on grass root level.

3. After fall of USSR & intl. Embargo on East European countries,
Vietnam found that they have only 3 months of fuel stock, economy
was in total darkness. They then adopted shock-therapy for FDI
(very aggressive advantage offered for FDI) at the same time got
tremendous support from Libya, Iraq, Indonesia & also from India.
market incentives introduced to unfold the dynamism, creativeness
& savings. FDI law liberated many things, even pvt. Companies
were allowed to export & import directly. Given limited shock
therapy on price-reform, exchange rate, trade liberalization of crop
trading, hard budget constraint for SOEs. FDI law liberated many
things, even pvt. Companies were allowed to export & import
directly.

4. Chronology of Legal Propogation
• 1977: Government of Vietnam promulgated Decree 115
on FDI.
• 1987: National Asembly promulgated Law on FDI
• 1990 - 2017: Unifying Law on FDI with Law on
Investing Abroad.
• Amended on 1990, 1992, 1996, 2005, 2017
• Buy shares form SOEs and Private company

5. Why FDI in VN
 Permits investment to exceed savings
without foreign borrowing – source of
growth – evidence?
 Transfer of technology
 Transfer of skills -Spillover effects
 Transfer of managerial know-how
 Integration into world economy

6. 2009 2010 2011 2012 Sep - 13 2018 (F)
GDP 5.32% 6.78% 5.89% 5.03% 5.14% 7.28%
CPI 6.52% 11.75% 18.13% 6.81% 6.3% 3.54 %
Vietnam Economic Indicator

7. VEI
Indicators 2010 2011 2012 2013 (F) 2014 (F) 2018 (F)
GDP Growth (%) 6.78 5.89 5.03 5.2-5.5 6-7 7.28
Import growth (%) 20.1 24.7 7.1 14-16 12-15 11.5
Export Growth (%) 25.5 33.3 18.3 12-14 10-13 10-13
Balance of Trade (USD Billion) -12.4 -9.5 0.3 -2  -4 -8  -10 -7.21
Unemployment Rate (%) 4.3 3.6 3.25 4 – 5 4 - 5 4 - 5
Inflation Rate (%) 11.75 18.13 6.81 7-9 8-10 8-10
Average Lending Interest Rate (%) 12-15 17-19 12-15 9-12 10-13 10-13
Average Exchange Rate
(USD/VND)
19,500 21,036 20,850-20,950 21,000-22,000 21,500-22,500 22,500-23,500
Sources: Vietnam State Bank, Ministry of Industry and Trade, Ministry of Planning & Investment, General Statistics Office,
Reuters, World Bank, IMF, ADB

8. GDP Growth in Asia

11. Vietnam’s Integration Process
Startofthe“Đổimới”
1986 1992
Textile-Agreement
withEU
1995
StartthenegotiationtojoinWTO
FrameworkAgreementwithEU
2001
BilateralTrade
AgreementwithUS
2004
AgreementonMarket
OpeningwithEU
2008
FTAVietnam-Japan-
ASEAN-
2010-
2011
Vietnam-EU;Vietnam-
ChileFTAs;TPP
1993
AFTA,ASEANFree
TradeAgreement
FreeTradeAgreementChina-
ASEAN
2005 2007
WTO-membership
FTAKorea-ASEAN
2009
FTAASEAN-Australia-New
Zealand
FTAIndia-ASEAN

12. Ease of Doing Business
World Bank 2010
Nation Rank
Singapore 1
Thailand 17
Malaysia 18
Taiwan 25
Sri Lanka 89
China 91
Vietnam 98
Bangladesh 122
Indonesia 129
India 132
Philippines 136
Cambodia 138
Myanmar / Burma -
12
ranked 69
Ranked 69
among 190
countries in
2018

13. Facilities for FDI
• Foreign investor may
- Invest jointly with Vietnamese company
- Invest in 100% foreign-owned company
- buy shares from Vietnamese SOE and private compan
- BOT for foreign investors
- Legal protection for foreign ownership
• Decree on investing abroad

14. Incentives for FDI
• Extra-legal incentives for big FDI projects
• 17 Economic Zones & 3 Special Economic Zones
• Tax Facilities
- Timely limited exemption of Business Income Tax
- Land access & reduction of land tax
- Import duty exemption for fixed assets
• Vietnam signed 14 FTAs including CPTPP, EVFTA
and soon RCEP.

15. Achievements
• FDI Projects - 26.500
- USD 334
» Corruption lessening
• FDI Share -18-25% of total investment
•Index of economic freedom : 55.3
source : (World street journal 2019)
• FDI Contribution - 70% of total export
- 14% of budget revenue
• Socio- economic impact-employment,lifestyle,PPP,CPI etc.

16. Challenges
• Environment and
• Corruption

17. Reasons for Sustainability
i) single party govt. (easy to take decision on
reforms of law for facilitating FDI
ii) as Land owner is the Govt., so investors
faces practically no problem in finding place
and space for setting up the industry.

18. CONCLUSION
i) key learning points, best practices and process relevant to Bangladesh:
a) great combination of peoples demand through legislators,elected representatives
and govt. institutions (what we call holistic approach)
b) solidarity of peoples of Vietnam due to their very long struggle for freedom and
unquestionable love & respect for the great leader Ho Chi Minh
ii) Policy Implication and replicability of those learnings in Bangladesh:
Development is meaningless if section of people stay hungry or living with poverty,
resources of state is enjoyed by all the people . All policy is for the people and
Vietnam approached steadily to alleviate poverty, hunger, want of education and
galloped toward development as what the world see today.
Regarding (i) and (ii) we've great similarity and if experiences of Vietnam can be
shared it will aid us implementing a speedy understanding and amendments of
procedure for development and reaching SDG by 2030.