In addition to removing obsolete administrative procedures, Vietnam should issue specific sets of criteria to ensure greater efficiency in attracting foreign direct investment (FDI) into priority areas, according to Nguyen Anh Duong, head of the Macroeconomic Policy Department under the Central Institute for Economic Management (CIEM).

Overview of the CIEM's conference on June 1. Photo: Nguyen Tung.

“Low quality of institutional framework, digital infrastructure and productivity are three bottlenecks hindering Vietnam’s development in the post-Covid-19 period,” Duong said at a conference on June 1.

Regarding this issue, economist Vo Tri Thanh, CIEM’s former vice director, said the Covid-19 pandemic has triggered the trend of politicization of economic activities, which was best demonstrated by the US – China tensions and protectionism.

Thanh said in a world of growing uncertainties, countries like Vietnam should adopt flexible policies and act fast to grasp a new wave of investment capital as foreign investors are looking to diversify their global value chains away from China.

“It is not a coincidence that Prime Minister Nguyen Xuan Phuc has set up a task force to promote investments in the country,” Thanh added.

“Instead of waiting for others to come, we have to be active in approaching potential investors and addresses bottlenecks in attracting FDI,” Thanh asserted.

Thanh, however, noted that while Vietnam is pursuing higher quality FDI, it is essential to continue to support the private sector, saying this would help make a strong and independent economy.

Dau Anh Tuan, director of the Legal Department at the Vietnam Chamber of Commerce and Industry (VCCI), said the initial success in tackling Covid-19 proved the country’s stable business environment and efficient state governance.

Tuan noted as the EU – Vietnam Free Trade Agreement (EVFTA), the EU’s only second trade agreement to date in the Southeast Asian region, is set to come into play, Vietnam is holding major advantages to attract investors compared to regional peers.

However, as the Covid-19 pandemic is transforming the world, Vietnam has to move fast, he stated.

“Vietnam should shift its focus from addressing business concerns to creating a favorable environment for growth,” Tuan added.

Improving the quality of state management and smoothing administrative procedures are highly demanded by the business community, not only the progress of cutting red tape, Tuan continued.

Data: GSO. Chart: Nguyen Tung.

Disbursement of FDI in Vietnam in May is estimated at US$1.55 billion, the highest monthly figure since February, a report of the Foreign Investment Agency (FIA) under the Ministry of Planning and Investment has shown.

The data indicates a positive sign that foreign investors are accelerating their projects’ progress as the Covid-19 pandemic has been initially contained in Vietnam.

Overall, disbursement of FDI projects in Vietnam totaled US$6.7 billion in the first five months of 2020, representing a decline of 8.2% year-on-year.

Meanwhile, FDI approvals in the January – May period fell 17% year-on-year to US$13.9 billion. The figure, however, is higher than that of the same five-month period from 2016 to 2018, posting increases of 37.6%, 14.8% and 40.4% compared to the corresponding period of 2016, 2017 and 2018, respectively.